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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                         to                        
Commission file number: 000-23255
COPART, INC.
(Exact name of registrant as specified in its charter)
Delaware
000-23255
94-2867490
(State or other jurisdiction of incorporation or organization)
(Commission File Number)
(I.R.S. Employer Identification No.)
14185 Dallas ParkwaySuite 300
Dallas
Texas
75254
        (Address of principal executive offices) (zip code)
(972) 391-5000
(Registrant’s telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.0001CPRTThe NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
As of March 1, 2022, 237,497,303 shares of the registrant’s common stock were outstanding.



Copart, Inc.
Index to the Quarterly Report
January 31, 2022
Table of ContentsPage Number
2

Table of Contents


Copart, Inc.
Consolidated Balance Sheets
(Unaudited)
(In thousands, except share amounts)January 31, 2022July 31, 2021
ASSETS
Current assets:
Cash, cash equivalents, and restricted cash$971,651 $1,048,260 
Investment in held to maturity securities374,866  
Accounts receivable, net630,629 480,628 
Vehicle pooling costs123,896 94,449 
Inventories52,979 44,968 
Income taxes receivable15,426 20,012 
Prepaid expenses and other assets19,926 14,294 
Total current assets2,189,373 1,702,611 
Property and equipment, net2,376,013 2,296,624 
Operating lease right-of-use assets120,309 119,487 
Intangibles, net42,731 45,873 
Goodwill352,908 355,717 
Other assets55,622 41,831 
Total assets$5,136,956 $4,562,143 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities$367,699 $369,826 
Deferred revenue20,577 20,973 
Income taxes payable6,458 7,760 
Current portion of operating and finance lease liabilities23,126 22,472 
Total current liabilities417,860 421,031 
Deferred income taxes69,759 63,969 
Income taxes payable57,193 52,345 
Operating and finance lease liabilities, net of current portion98,459 97,961 
Long-term debt and other liabilities, net of discount403,829 397,636 
Total liabilities1,047,100 1,032,942 
Commitments and contingencies
Stockholders’ equity:
Preferred stock: $0.0001 par value - 5,000,000 shares authorized; none issued
  
Common stock: $0.0001 par value - 400,000,000 shares authorized; 237,474,492 and 237,014,273 shares issued and outstanding, respectively.
24 24 
Additional paid-in capital797,955 761,834 
Accumulated other comprehensive loss(123,502)(100,860)
Retained earnings3,415,379 2,868,203 
Total stockholders’ equity4,089,856 3,529,201 
Total liabilities and stockholders’ equity$5,136,956 $4,562,143 
The accompanying notes are an integral part of these consolidated financial statements.
3

Table of Contents
Copart, Inc.
Consolidated Statements of Income
(Unaudited)
Three Months Ended January 31,Six Months Ended January 31,
(In thousands, except per share amounts)2022202120222021
Service revenues and vehicle sales:
Service revenues$711,090 $532,601 $1,378,908 $1,047,973 
Vehicle sales156,370 84,430 298,684 161,998 
Total service revenues and vehicle sales867,460 617,031 1,677,592 1,209,971 
Operating expenses:
Yard operations323,814 235,904 622,508 467,715 
Cost of vehicle sales140,304 73,629 266,712 137,989 
General and administrative56,014 49,277 110,923 97,452 
Total operating expenses520,132 358,810 1,000,143 703,156 
Operating income347,328 258,221 677,449 506,815 
Other expense:
Interest expense, net(4,433)(4,849)(9,540)(9,881)
Other income, net(840)(920)(28)2,333 
Total other expense(5,273)(5,769)(9,568)(7,548)
Income before income taxes342,055 252,452 667,881 499,267 
Income tax expense54,643 59,012 120,106 105,542 
Net income$287,412 $193,440 $547,775 $393,725 
Basic net income per common share$1.21 $0.82 $2.31 $1.67 
Weighted average common shares outstanding237,186 236,152 237,167 235,971 
Diluted net income per common share$1.19 $0.81 $2.27 $1.64 
Diluted weighted average common shares outstanding241,187 240,280 241,244 240,124 
The accompanying notes are an integral part of these consolidated financial statements.
4

Table of Contents
Copart, Inc.
Consolidated Statements of Comprehensive Income
(Unaudited)
Three Months Ended January 31,Six Months Ended January 31,
(In thousands)2022202120222021
Comprehensive income, net of tax:
Net income$287,412 $193,440 $547,775 $393,725 
Other comprehensive income:
Foreign currency translation adjustments(12,124)21,774 (22,642)14,368 
Comprehensive income$275,288 $215,214 $525,133 $408,093 
The accompanying notes are an integral part of these consolidated financial statements.
5

Table of Contents
Copart, Inc.
Consolidated Statements of Stockholders’ Equity
(Unaudited)
Common StockAccumulated
Other
Comprehensive
Income (Loss)
Additional
Paid-in
Capital
(In thousands, except share amounts)Outstanding
Shares
AmountRetained
Earnings
Stockholders’
Equity
Balances at July 31, 2021237,014,273 $24 $761,834 $(100,860)$2,868,203 $3,529,201 
Net income— — — — 260,363 260,363 
Currency translation adjustment— — — (10,518)— (10,518)
Exercise of stock options, net of repurchased shares145,986 — 5,572 — (249)5,323 
Stock-based compensation21,091 — 9,452 — — 9,452 
Balances at October 31, 2021237,181,350 24 776,858 (111,378)3,128,317 3,793,821 
Net income— — — — 287,412 287,412 
Currency translation adjustment— — — (12,124)— (12,124)
Exercise of stock options, net of repurchased shares246,451 — 6,413 — (350)6,063 
Stock-based compensation2,767 — 9,662 — — 9,662 
Shares issued for Employee Stock Purchase Plan43,924 — 5,022 — — 5,022 
Balances at January 31, 2022237,474,492 24 797,955 (123,502)3,415,379 4,089,856 
The accompanying notes are an integral part of these consolidated financial statements.

6

Table of Contents
Copart, Inc.
Consolidated Statements of Stockholders’ Equity (Continued)
(Unaudited)
Common StockAccumulated
Other
Comprehensive
Income (Loss)
Additional
Paid-in
Capital
(In thousands, except share amounts)Outstanding
Shares
AmountRetained
Earnings
Stockholders’
Equity
Balances at July 31, 2020235,315,337 $24 $672,727 $(121,088)$1,937,853 $2,489,516 
Net income— — — — 200,285 200,285 
Currency translation adjustment— — — (7,406)— (7,406)
Exercise of stock options, net of repurchased shares802,670 — 20,014 — (489)19,525 
Stock-based compensation— — 8,913 — — 8,913 
Balances at October 31, 2020236,118,007 24 701,654 (128,494)2,137,649 2,710,833 
Net income— — — — 193,440 193,440 
Currency translation adjustment— — — 21,774 — 21,774 
Exercise of stock options, net of repurchased shares121,158 — 3,098 — (298)2,800 
Stock-based compensation— — 8,865 — — 8,865 
Shares issued for Employee Stock Purchase Plan67,877 — 4,880 — — 4,880 
Balances at January 31, 2021236,307,042 24 718,497 (106,720)2,330,791 2,942,592 
The accompanying notes are an integral part of these consolidated financial statements.
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Copart, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended January 31,
(In thousands)20222021
Cash flows from operating activities:
Net income$547,775 $393,725 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization, including debt cost65,627 60,898 
Allowance for credit loss1,695 213 
Equity in losses (earnings) of unconsolidated affiliates685 (1,343)
Stock-based compensation19,114 17,778 
Gain on sale of property and equipment(755)(1,145)
Deferred income taxes6,003 9,442 
Changes in operating assets and liabilities:
Accounts receivable(152,763)(111,148)
Vehicle pooling costs(29,623)(19,099)
Inventories(8,589)(9,772)
Prepaid expenses and other current and non-current assets(19,889)5,802 
Operating lease right-of-use assets and lease liabilities657 470 
Accounts payable and accrued liabilities10,741 10,041 
Deferred revenue(309)6,098 
Income taxes receivable4,577 20,243 
Income taxes payable1,655 10,838 
Other liabilities(53) 
Net cash provided by operating activities446,548 393,041 
Cash flows from investing activities:
Purchases of property and equipment(156,200)(283,214)
Purchase of assets in connection with acquisitions(469) 
Proceeds from sale of property and equipment1,252 129 
Purchase of held to maturity securities(374,866) 
Net cash used in investing activities(530,283)(283,085)
Cash flows from financing activities:
Proceeds from the exercise of stock options11,985 23,112 
Proceeds from the issuance of Employee Stock Purchase Plan shares5,022 4,880 
Payments for employee stock-based tax withholdings(599)(787)
Payments of finance lease obligations(314)(622)
Net cash provided by financing activities16,094 26,583 
Effect of foreign currency translation(8,968)2,146 
Net increase in cash, cash equivalents, and restricted cash(76,609)138,685 
Cash, cash equivalents, and restricted cash at beginning of period1,048,260 477,718 
Cash, cash equivalents, and restricted cash at end of period$971,651 $616,403 
Supplemental disclosure of cash flow information:
Interest paid$9,311 $7,614 
Income taxes paid, net of refunds$128,972 $64,860 
The accompanying notes are an integral part of these consolidated financial statements.
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Copart, Inc.
Notes to Consolidated Financial Statements
January 31, 2022
(Unaudited)
NOTE 1 – Summary of Significant Accounting Policies
Basis of Presentation and Description of Business
Copart, Inc. (“the Company”) provides vehicle sellers with a full range of services to process and sell vehicles over the internet through the Company’s Virtual Bidding Third Generation (“VB3”) internet auction-style sales technology. Vehicle sellers consist primarily of insurance companies, but also include banks, finance companies, charities, fleet operators, dealers, vehicle rental companies, and individuals. The Company sells principally to licensed vehicle dismantlers, rebuilders, repair licensees, used vehicle dealers, exporters, and directly to the general public. The majority of vehicles sold on behalf of insurance companies are either damaged vehicles deemed a total loss or not economically repairable by the insurance companies or are recovered stolen vehicles for which an insurance settlement with the vehicle owner has already been made. The Company offers vehicle sellers a full range of services that expedite each stage of the vehicle sales process, minimize administrative and processing costs and maximize the ultimate sales price through the online auction process. In the United States (“U.S.”), Canada, Brazil, the Republic of Ireland, Finland, the United Arab Emirates (“U.A.E.”), Oman, and Bahrain, the Company sells vehicles primarily as an agent and derives revenue primarily from auction and auction related sales transaction fees charged for vehicle remarketing services as well as fees for services subsequent to the auction, such as delivery and storage. In the United Kingdom (“U.K.”), Germany, and Spain, the Company operates both as an agent and on a principal basis, in some cases purchasing salvage vehicles outright and reselling the vehicles for its own account. In Germany and Spain, the Company also derives revenue from listing vehicles on behalf of insurance companies and insurance experts to determine the vehicle’s residual value and/or to facilitate a sale for the insured.
Principles of Consolidation
In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments of a normal recurring nature considered necessary for fair presentation of the Company’s financial position as of January 31, 2022 and July 31, 2021, its consolidated statements of income, comprehensive income and stockholders’ equity for the three and six months ended January 31, 2022 and 2021, and its cash flows for the six months ended January 31, 2022 and 2021. Interim results for the three and six months ended January 31, 2022 are not necessarily indicative of the results that may be expected for any future period, or for the entire year ending July 31, 2022. These consolidated financial statements have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. The interim consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended July 31, 2021. Certain prior year amounts have been reclassified to conform to current year presentation.
The consolidated financial statements of the Company include the accounts of the parent company and its wholly-owned subsidiaries. Significant intercompany transactions and balances have been eliminated in consolidation.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Estimates include, but are not limited to, vehicle pooling costs; income taxes; stock-based compensation; and contingencies. Actual results may differ from these estimates.
Revenue Recognition
The Company’s primary performance obligation is the auctioning of consigned vehicles through an online auction process. Service revenue and vehicle sales revenue are recognized at the date the vehicles are sold at auction, excluding annual registration fees. Costs to prepare the vehicles for auction, including inbound transportation costs and titling fees, are deferred and recognized at the time of revenue recognition at auction.
The Company’s disaggregation between service revenues and vehicle sales at the segment level reflects how the nature, timing, amount and uncertainty of its revenues and cash flows are impacted by economic factors. The Company reports sales taxes on relevant transactions on a net basis in the Company’s consolidated results of operations, and therefore does not include sales taxes in revenues or costs.
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Service revenues
The Company’s service revenue consists of auction and auction related sales transaction fees charged for vehicle remarketing services. Within this revenue category, the Company’s primary performance obligation is the auctioning of consigned vehicles through an online auction process. These auction and auction related services may include a combination of vehicle purchasing fees, vehicle listing fees, and vehicle selling fees that can be based on a predetermined percentage of the vehicle sales price, tiered vehicle sales price driven fees, or at a fixed fee based on the sale of each vehicle regardless of the selling price of the vehicle; transportation fees for the cost of transporting the vehicle to or from the Company’s facility; title processing and preparation fees; vehicle storage fees; bidding fees; and vehicle loading fees. These services are not distinct within the context of the contract. Accordingly, revenue for these services is recognized when the single performance obligation is satisfied at the completion of the auction process. The Company does not take ownership of these consigned vehicles, which are stored at the Company’s facilities located throughout the U.S. and at its international locations. These fees are recognized as net revenue (not gross vehicle selling price) at the time of auction in the amount of such fees charged.
The Company has a separate performance obligation related to providing access to its online auction platform as the Company charges members an annual registration fee for the right to participate in its online auctions and access the Company’s bidding platform. 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.
Three Months Ended January 31,Six Months Ended January 31,
(In thousands)2022202120222021
Service revenues
United States$630,707 $465,423 $1,221,465 $915,658 
International80,383 67,178 157,443 132,315 
Total service revenues$711,090 $532,601 $1,378,908 $1,047,973 
Vehicle sales
Certain vehicles are purchased and remarketed on the Company’s own behalf. The Company has a single performance obligation related to the sale of these vehicles, which is the completion of the online auction process. Vehicle sales revenue is recognized on the auction date. As the Company acts as a principal in vehicle sales transactions, the gross sales price at auction is recorded as revenue.
Three Months Ended January 31,Six Months Ended January 31,
(In thousands)2022202120222021
Vehicle sales
United States$96,679 $52,500 $184,382 $99,520 
International59,691 31,930 114,302 62,478 
Total vehicle sales$156,370 $84,430 $298,684 $161,998 
Contract assets
The Company capitalizes certain contract assets related to obtaining a contract, where the amortization period for the related asset is greater than one year. These assets are amortized over the expected life of the customer relationship. Contract assets are classified as current or long-term other assets, based on the timing of when the Company expects to recognize the related revenues and are amortized as an offset to the associated revenues on a straight-line basis. The Company assesses these costs for impairment at least quarterly and as “triggering” events occur that indicate it is more likely than not that an impairment exists. The contract asset costs where the amortization period for the related asset is one year or less are expensed as incurred and recorded within general and administrative expenses in the accompanying consolidated statements of income.
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The change in the carrying amount of contract assets was as follows (In thousands):
Balance as of July 31, 2021$7,485 
Costs amortized during the period(1,760)
Effect of foreign currency exchange rates272 
Balance as of January 31, 2022$5,997 
Vehicle Pooling Costs
The Company defers costs that relate directly to the fulfillment of its contracts associated with vehicles consigned to and received by the Company, but not sold as of the end of the period. The Company quantifies the deferred costs using a calculation that includes the number of vehicles at its facilities at the beginning and end of the period, the number of vehicles sold during the period, and an allocation of certain yard operation costs of the period. The primary expenses allocated and deferred are inbound transportation costs, titling fees, certain facility costs, labor, and vehicle processing. If the allocation factors change, then yard operation expenses could increase or decrease correspondingly in the future. These costs are expensed into yard operations expenses as vehicles are sold in subsequent periods on an average cost basis.
Foreign Currency Translation
The Company records foreign currency translation adjustments from the process of translating the functional currency of the financial statements of its foreign subsidiaries into the U.S. dollar reporting currency. The British pound, Canadian dollar, Brazilian real, European Union euro, U.A.E. dirham, Omani rial, and Bahraini dinar are the functional currencies of the Company’s foreign subsidiaries as they are the primary currencies within the economic environment in which each subsidiary operates. The original equity investment in the respective subsidiaries is translated at historical rates. Assets and liabilities of the respective subsidiary’s operations are translated into U.S. dollars at period-end exchange rates, and revenues and expenses are translated into U.S. dollars at average exchange rates in effect during each reporting period. Adjustments resulting from the translation of each subsidiary’s financial statements are reported in other comprehensive income.
The cumulative effects of foreign currency exchange rate fluctuations were as follows (In thousands):
Cumulative loss on foreign currency translation as of July 31, 2020$(121,088)
Gain on foreign currency translation20,228 
Cumulative loss on foreign currency translation as of July 31, 2021$(100,860)
Loss on foreign currency translation(22,642)
Cumulative loss on foreign currency translation as of January 31, 2022$(123,502)
Fair Value of Financial Instruments
The Company records its financial assets and liabilities at fair value in accordance with the framework for measuring fair value in U.S. GAAP. In accordance with Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures, the Company considers fair value as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants under current market conditions. This framework establishes a fair value hierarchy that prioritizes the inputs used to measure fair value:
Level I    Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities traded in active markets.
Level II    Inputs other than quoted prices included within Level I that are observable for the asset or liability, either directly or indirectly.
Level III    Inputs that are generally unobservable. 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 (as defined in Note 6) approximated their fair values as of January 31, 2022 and July 31, 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 6 – Long-Term Debt and Note 7 – Fair Value Measurements.
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Cash, Cash Equivalents, and Restricted Cash
The Company considers all highly liquid investments purchased with original maturities of three months or less at the time of purchase to be cash equivalents. Cash, cash equivalents, and restricted cash include cash held in checking, U.S. Treasury Bills, and money market accounts. The Company periodically invests its excess cash in money market funds and U.S. Treasury Bills. The Company’s cash, cash equivalents, and restricted cash are placed with high credit quality financial institutions.
Capitalized Software Costs
The Company capitalizes system development costs and website development costs related to the enterprise computing services during the application development stage. Costs related to preliminary project activities and post implementation activities are expensed as incurred. Internal-use software is amortized on a straight-line basis over its estimated useful life, generally three to seven years. The Company evaluates the useful lives of these assets on an annual basis and tests for impairment whenever events or changes in circumstances occur that impact the recoverability of these assets.
Total gross capitalized software as of January 31, 2022 and July 31, 2021 was $71.8 million and $66.2 million, respectively. Accumulated amortization expense related to software as of January 31, 2022 and July 31, 2021 totaled $48.2 million and $43.4 million, respectively.
NOTE 2 — Accounts Receivable, Net
Accounts receivable, net consisted of:
(In thousands)January 31, 2022July 31, 2021
Advance charges receivable$506,841 $385,002 
Trade accounts receivable127,196 97,249 
Other receivables3,629 4,013 
637,666 486,264 
Less: Allowance for credit loss(7,037)(5,636)
Accounts receivable, net$630,629 $480,628 
Advance charges receivable represents amounts paid to third parties on behalf of insurance companies for which the Company will be reimbursed when the vehicle is sold. As advance charges are recovered within one year, the Company has not adjusted the amount of consideration received from the customer for a significant financing component. Trade accounts receivable includes fees and gross auction proceeds to be collected from insurance companies and buyers.
NOTE 3 — Property and Equipment, Net
Property and equipment, net consisted of the following:
(In thousands)January 31, 2022July 31, 2021
Land$1,479,387 $1,428,262 
Buildings and improvements1,157,589 1,126,414 
Transportation and other equipment371,230 326,622 
Office furniture and equipment82,136 79,928 
Software71,838 66,170 
 3,162,180 3,027,396 
Less: Accumulated depreciation and amortization(786,167)(730,772)
Property and equipment, net$2,376,013 $2,296,624 
Depreciation expense on property and equipment was $31.4 million and $29.7 million for the three months ended January 31, 2022 and 2021, respectively, and $61.3 million and $56.8 million for the six months ended January 31, 2022 and 2021, respectively.
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NOTE 4 – Leases
The Company has both lessee and lessor arrangements. The Company determines whether a contract is or contains a lease at the inception of the contract or at any subsequent modification. A contract will be deemed to be or contain a lease if the contract conveys the right to control and direct the use of identified property, plant, or equipment for a period of time in exchange for consideration. The Company generally must also have the right to obtain substantially all of the economic benefits from the use of the property, plant, and equipment. Depending on the terms, leases are classified as either operating or finance leases if the Company is the lessee, or as operating, sales-type, or direct financing leases if the Company is the lessor. Certain of the Company’s lessee and lessor leases have renewal options to extend the leases for additional periods at the Company’s discretion.
Leases - Lessee
The Company leases certain facilities and certain equipment under non-cancelable finance and operating leases, which are recorded as right-of-use assets and lease liabilities. Certain leases provide the Company with either a right of first refusal to acquire or an option to purchase a facility at fair value. Certain leases also contain escalation clauses and renewal option clauses calling for increased rents. Where a lease contains an escalation clause or a concession, such as a rent holiday or tenant improvement allowance, the Company includes these items in the determination of the right-of-use asset and the lease liabilities. The effects of these escalation clauses or concessions have been reflected in lease expense on a straight-line basis over the expected lease term and any variable lease payments subsequent to establishing the lease liability are expensed as incurred. The lease term commences on the date when the Company has the right to control the use of the leased property, which is typically before lease payments are due under the terms of the lease. Certain of the Company’s leases have renewal periods up to 40 years, exercisable at the Company’s option, and generally require the Company to pay property taxes, insurance and maintenance costs, in addition to the lease payments. At lease inception, the Company includes all renewals or option periods that are reasonably certain to exercise when determining the expected lease term, as failure to renew the lease would impose an economic penalty.
Operating lease assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the expected lease term. To determine the present value of lease payments not yet paid, the Company estimates incremental borrowing rates based on the information available at lease commencement date, as rates are not implicitly stated in the Company’s leases.
Components of lease expense were as follows:
Three Months Ended January 31,Six Months Ended January 31,
(In thousands)2022202120222021
Operating lease expense$6,943 $7,024 $13,997 $14,281 
Finance lease expense:
Amortization of right-of-use assets155 167 309 334 
Interest on finance lease liabilities2 23 4 44 
Short-term lease expense1,723 1,023 3,491 2,268 
Variable lease expense330 395 554 934 
Total lease expense$9,153 $8,632 $18,355 $17,861 
Supplemental cash flow information related to leases as of January 31, 2022 were as follows:
Six Months Ended January 31,
(In thousands)20222021
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows related to operating leases$13,344 $14,597 
Operating cash flows related to finance leases3 17 
Financing cash flows related to finance leases314 622 
Right-of-use assets obtained in exchange for new operating lease liabilities14,156 12,812 
Right-of-use assets obtained in exchange for new finance lease liabilities 6,251 
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Leases - Lessor
The Company’s lessor arrangements include certain facilities and various land locations, of which each qualifies as an operating lease. Certain leases also contain escalation clauses and renewal option clauses calling for increased rents. Where a lease contains an escalation clause or a concession, such as a rent holiday or tenant improvement allowance, the Company includes these items in the determination of the straight-line rental income. The effects of these escalation clauses or concessions have been reflected in lease payments receivable on a straight-line basis over the expected lease term and any variable lease income subsequent to establishing the receivable will be recognized as earned.
The cost of the leased space as of January 31, 2022 and July 31, 2021 was $56.8 million and $55.5 million, respectively. The accumulated depreciation associated with the leased assets as of January 31, 2022 and July 31, 2021 was $2.2 million and $1.9 million, respectively. Both the leased assets and accumulated depreciation are included in Property and equipment, net on the consolidated balance sheet. Rental income from these operating leases was $3.7 million and $3.6 million for the three months ended January 31, 2022 and 2021, respectively, and $7.2 million and $7.2 million for the six months ended January 31, 2022 and 2021, respectively and is included within Service revenues on the consolidated statements of income.
NOTE 5 – Goodwill and Intangible Assets
The following table sets forth amortizable intangible assets by major asset class:
(In thousands)January 31, 2022July 31, 2021
Amortized intangibles:
Supply contracts and customer relationships$56,145 $55,598 
Trade names18,926 18,944 
Licenses and databases696 736 
Accumulated amortization(33,036)(29,405)
Net intangibles$42,731 $45,873 
Aggregate amortization expense on amortizable intangible assets was $1.8 million and $1.8 million for the three months ended January 31, 2022 and 2021, respectively, and $3.7 million and $3.5 million for the six months ended January 31, 2022 and 2021, respectively.
The change in the carrying amount of goodwill was as follows:
(In thousands)
Balance as of July 31, 2021$355,717 
Acquisitions during the period180 
Effect of foreign currency exchange rates(2,989)
Balance as of January 31, 2022$352,908 
NOTE 6 – Long-Term Debt
Credit Agreement
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.
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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.

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 0.0% 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 January 31, 2022 and July 31, 2021. Accordingly, the carrying value approximated fair value at January 31, 2022, and was classified within Level II of the fair value hierarchy.

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 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 January 31, 2022, the consolidated total net leverage ratio was (0.59):1. Minimum liquidity requirement as of January 31, 2022 was $2.5 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 Second Amended and Restated Credit Agreement as of January 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.
Note Purchase Agreement
On July 21, 2020, the Company entered into a Note Purchase Agreement and sold to certain purchasers (collectively, the “Purchasers”) $400.0 million in aggregate principal amount of senior secured notes (the “Senior Notes”) consisting of (i) $100.0 million aggregate principal amount of 4.07% Senior Notes, Series A, due December 3, 2024; (ii) $100.0 million aggregate principal amount of 4.19% Senior Notes, Series B, due December 3, 2026; (iii) $100.0 million aggregate principal amount of 4.25% Senior Notes, Series C, due December 3, 2027; 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. 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 Note Purchase Agreement contains customary affirmative and negative covenants and the Company was in compliance with all covenants related to the Note Purchase Agreement as of January 31, 2022.
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NOTE 7 – 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:
January 31, 2022July 31, 2021
(In thousands)Carrying Value TotalFair Value TotalCarrying Value TotalFair Value Total
Assets
Cash equivalents$709,241 $709,241 $754,300 $754,304 
Treasury Bills374,866 374,734   
Total Assets$1,084,107 $1,083,975 $754,300 $754,304 
Liabilities
Long-term fixed rate debt, including current portion$399,726 $414,439 $399,733 $432,027 
Total Liabilities$399,726 $414,439 $399,733 $432,027 
The Company has investments in Treasury Bills some of which mature over a period greater than 90 days days and are classified as short-term investments. The Treasury bills are carried at amortized cost and classified as held-to-maturity as the Company has the intent and the ability to hold them until they mature. The carrying value of the Treasury bills are adjusted for accretion of discounts over the remaining life of the investment. Income related to the Treasury bills is recognized in interest income in the Company’s consolidated statement of income. The Treasury bills classified within Level I of the fair value hierarchy.

During the six months ended January 31, 2022, no transfers were made between any levels within the fair value hierarchy. The fair value of the Senior Notes is based on the discounted value of each interest and principal payment calculated utilizing market interest rates of similar types of borrowing arrangements and was classified within Level II of the fair value hierarchy. See Note 1 – Summary of Significant Accounting Policies, and Note 6 – Long-Term Debt.
NOTE 8 – Net Income Per Share
The table below reconciles basic weighted average shares outstanding to diluted weighted average shares outstanding:
Three Months Ended January 31,Six Months Ended January 31,
(In thousands)2022202120222021
Weighted average common shares outstanding237,186 236,152 237,167 235,971 
Effect of dilutive securities4,001 4,128 4,077 4,153 
Weighted average common and dilutive potential common shares outstanding
241,187 240,280 241,244 240,124 
There were no material adjustments to net income required in calculating diluted net income per share. Excluded from the dilutive earnings per share calculation were 150,250 and 550,000 options to purchase the Company’s common stock for the three months ended January 31, 2022 and 2021, respectively, and 205,500 and 1,900,000 options to purchase the Company’s common stock for six months ended January 31, 2022 and 2021, respectively, because their inclusion would have been anti-dilutive.
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NOTE 9 – Stock-based Compensation
The Company recognizes compensation expense for stock option awards, without a market condition, on a straight-line basis over the requisite service period of the award. The following is a summary of activity for the Company’s stock options for the six months ended January 31, 2022:
(In thousands, except per share and term data)SharesWeighted Average Exercise PriceWeighted Average Remaining Contractual Term (In years)Aggregate Intrinsic Value
Outstanding as of July 31, 20217,557 $56.19 6.53$686,269 
Grants of options145 145.21 
Exercises(392)30.87 
Forfeitures or expirations(107)55.14 
Outstanding as of January 31, 20227,203 $59.38 6.08$505,604 
Exercisable as of January 31, 20224,545 $43.84 4.97$388,501 
The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company’s common stock. The number of options that were in-the-money was 7,052,304 at January 31, 2022.
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. Adair, with 20% vesting 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 time-based vesting conditions of 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 will be recognized using the accelerated attribution method over each vesting tranche of the award. The Company recognized $3.3 million in compensation expense for this grant in the six months ended January 31, 2022.
Subsequently, on November 17, 2021, the Compensation Committee amended the stock option award to Mr. Adair to implement a new market-based vesting condition with respect to 500,000 of the unvested stock options. Following the amendment, and subject to the existing time-based vesting schedule, no portion of these 500,000 stock options will be exercisable unless the 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), 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 table below sets forth the stock-based compensation recognized by the Company for stock options, restricted stock, and restricted unit awards:
Three Months Ended January 31,Six Months Ended January 31,
(In thousands)2022202120222021
General and administrative$8,247 $7,051 $16,718 $14,433 
Yard operations1,415 1,814 2,396 3,345 
Total stock-based compensation$9,662 $8,865 $19,114 $17,778 
The Company’s restricted stock awards (“RSA”) and restricted stock unit awards (“RSU”) have generally been issued with vesting periods ranging from two years to five years and vest solely on service conditions. Accordingly, the Company recognizes compensation expense for RSA and RSU awards on a straight-line basis over the requisite service period of the award.
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The following is a summary of activity for the Company’s RSA’s and RSU’s for the six months ended January 31, 2022:
(In thousands, except per share data)Restricted SharesWeighted Average Grant Date Fair Value
Outstanding as of July 31, 2021102 $90.46 
Grants 66 143.24 
Vested(13)66.16 
Forfeitures or expirations(7)115.40 
Outstanding as of January 31, 2022148 $115.24 
NOTE 10 – 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 Company deems appropriate and may be discontinued at any time. The Company did not repurchase any shares of its common stock under the program during the six months ended January 31, 2022 or 2021. As of January 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.
NOTE 11 – Recent Accounting Pronouncements
Adopted
In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes. ASU 2019-12 eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. 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 did not have a material impact on the Company’s consolidated results of operations and financial position.
NOTE 12 – Legal Proceedings
The Company is subject to threats of litigation and is involved in actual litigation and damage claims arising in the ordinary course of business, such as actions related to injuries, property damage, contract disputes, and handling or disposal of vehicles. There are no material pending legal proceedings to which the Company is a party, or with respect to which any of the Company’s property is subject.
The Company provides for costs relating to matters when a loss is probable and the amount can be reasonably estimated. The effect of the outcome of any such matters on the Company’s future consolidated results of operations and cash flows cannot be predicted because any such effect depends on future results of operations and the amount and timing of the resolution of any such matters. The Company believes that any ultimate liability regarding existing litigation and claims would not have a material effect on its consolidated results of operations, financial position, or cash flows. However, the amount of the liabilities associated with claims, if any, cannot be determined with certainty. The Company maintains insurance which may or may not provide coverage for claims made against the Company. There is no assurance that there will be insurance coverage available when and if needed. Additionally, the insurance that the Company carries requires that the Company pay for costs and/or claims exposure up to the amount of the insurance deductibles.
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NOTE 13 – Segments and Other Geographic Reporting
The Company’s U.S. and International regions are considered two separate operating segments and are disclosed as two reportable segments. The segments represent geographic areas and reflect how the chief operating decision maker allocates resources and measures results, including total revenues and operating income.
The following table presents financial information by segment:
Three Months Ended January 31, 2022Three Months Ended January 31, 2021
(In thousands)United StatesInternationalTotalUnited StatesInternationalTotal
Service revenues$630,707 $80,383 $711,090 $465,423 $67,178 $532,601 
Vehicle sales96,679 59,691 156,370 52,500 31,930 84,430 
Total service revenues and vehicle sales727,386 140,074 867,460 517,923 99,108 617,031 
Yard operations278,093 45,721 323,814 199,107 36,797 235,904 
Cost of vehicle sales90,263 50,041 140,304 48,601 25,028 73,629 
General and administrative46,384 9,630 56,014 40,763 8,514 49,277 
Operating income$312,646 $34,682 $347,328 $229,452 $28,769 $258,221 
Depreciation and amortization$29,316 $