[X] |
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: July 31, 2013 |
o |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to |
(Exact name of registrant as specified in its charter) |
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Delaware |
94-2867490 |
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
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14185 Dallas Parkway, Suite 300, Dallas, Texas (Address of principal executive offices) |
75254 (Zip code) |
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Registrants telephone number, including area code: (972) 391-5000 Securities registered pursuant to Section 12(b) of the Act: |
Title of Each Class |
Name of each exchange on which registered |
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Common Stock, $0.0001 par value |
The NASDAQ Global Select Market |
Large Accelerated Filer [X] |
Accelerated Filer o |
Non-Accelerated Filer o |
Smaller Reporting Company o |
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(Do not check if a smaller reporting company) |
Page |
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PART I |
1 | |||||||||
Item 1. |
Business |
1 | ||||||||
Industry Overview |
3 | |||||||||
Operating and Growth Strategy |
5 | |||||||||
Our Competitive Advantages |
6 | |||||||||
Our Service Offerings |
7 | |||||||||
Sales |
10 | |||||||||
Members |
11 | |||||||||
Competition |
11 | |||||||||
Management Information Systems |
11 | |||||||||
Employees |
12 | |||||||||
Environmental Matters |
12 | |||||||||
Governmental Regulations |
12 | |||||||||
Intellectual Property and Proprietary Rights |
12 | |||||||||
Seasonality |
13 | |||||||||
Item 1A. |
Risk Factors |
13 | ||||||||
Item 1B. |
Unresolved Staff Comments |
25 | ||||||||
Item 2. |
Properties |
25 | ||||||||
Item 3. |
Legal Proceedings |
25 | ||||||||
Item 4. |
Mine Safety Disclosures |
25 | ||||||||
PART II |
26 | |||||||||
Item 5. |
Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
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26 | ||||||||
Item 6. |
Selected Financial Data |
29 | ||||||||
Item 7. |
Managements Discussion and Analysis of Financial Condition and Results of Operations |
30 | ||||||||
Item 7A. |
Quantitative and Qualitative Disclosures About Market Risk |
45 | ||||||||
Item 8. |
Financial Statements and Supplementary Data |
46 | ||||||||
Item 9. |
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure |
46 | ||||||||
Item 9A. |
Controls and Procedures |
46 | ||||||||
Item 9B. |
Other Information |
49 | ||||||||
PART III |
50 | |||||||||
Item 10. |
Directors, Executive Officers of the Registrant and Corporate Governance |
50 | ||||||||
Item 11. |
Executive Compensation |
50 | ||||||||
Item 12. |
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
51 | ||||||||
Item 13. |
Certain Relationships and Related Transactions, and Director Independence |
51 | ||||||||
Item 14. |
Principal Accountant Fees and Services |
51 | ||||||||
PART IV |
52 | |||||||||
Item 15. |
Exhibits and Financial Statement Schedules |
52 |
Item 1. |
Business |
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providing coverage that facilitates seller access to buyers around the world, reducing towing and third-party storage expenses, offering a local presence for vehicle inspection stations, and providing prompt response to catastrophes and natural disasters by specially-trained teams; |
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providing a comprehensive range of customer services that include merchandising services, efficient title processing, timely pick-up and delivery of vehicles, and Internet sales; |
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establishing and efficiently integrating new facilities and acquisitions; |
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increasing the number of bidders that can participate at each sale through the ease and convenience of Internet bidding; |
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applying technology to enhance operating efficiency through Internet bidding, web-based order processing, salvage value quotes, electronic communication with members and sellers, vehicle imaging, and an online used vehicle parts locator service; and |
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providing the venue for insurance customers through our Virtual Insured Exchange (VIX) product to contingently sell a vehicle through the auction process to establish its true value, allowing the insurance customer to avoid dealing with estimated values when negotiating with owners who wish to retain their damaged vehicles. |
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the anticipated percentage return on salvage (i.e., gross salvage proceeds, minus vehicle handling and selling expenses, divided by the actual cash value); |
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the services provided by the company and the degree to which such services reduce administrative costs and expenses; |
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the price the company charges for its services; |
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national coverage; |
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the ability to respond to natural disasters; |
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the ability to provide analytical data to the seller; and |
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in the U.K., the actual amount paid for the vehicle. |
Locations |
Acquisition or Greenfield |
Date |
Geographic Service Area |
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---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Homestead, Florida |
Greenfield |
September 2010 |
United States |
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Hartford City, Indiana |
Acquisition |
March 2011 |
United States |
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Atlanta, Georgia |
Greenfield |
August 2011 |
United States |
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Burlington, North Carolina |
Greenfield |
July 2012 |
United States |
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Webster, New Hampshire |
Greenfield |
September 2012 |
United States |
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Gainesville, Georgia |
Acquisition |
May 2013 |
United States |
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Davison, Michigan |
Acquisition |
May 2013 |
United States |
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Ionia, Michigan |
Acquisition |
May 2013 |
United States |
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Kincheloe, Michigan |
Acquisition |
May 2013 |
United States |
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Salvage Parent, Inc.* |
Acquisition |
May 2013 |
United States |
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Birmingham, England |
Acquisition |
March 2011 |
United Kingdom |
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Edmonton, Canada |
Acquisition |
May 2012 |
Canada |
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Calgary, Canada |
Acquisition |
May 2012 |
Canada |
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Dubai, U.A.E. |
Acquisition |
August 2012 |
United Arab Emirates |
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Embu, Brazil |
Acquisition |
November 2012 |
Brazil |
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Pirapora, Brazil |
Acquisition |
November 2012 |
Brazil |
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Osasco, Brazil |
Acquisition |
November 2012 |
Brazil |
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Castelo Branco, Brazil |
Acquisition |
November 2012 |
Brazil |
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Vila Jaguara, Brazil |
Acquisition |
November 2012 |
Brazil |
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Ettlingen, Germany |
Acquisition |
November 2012 |
Germany |
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Cordoba, Spain |
Acquisition |
June 2013 |
Spain |
* |
Salvage Parent, Inc. conducts business primarily as Quad City Salvage Auction, Crashed Toys, and Desert View Auto Auctions. Combined, these businesses operate at 39 locations in 14 states. |
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a reduction in administrative time and effort; |
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a reduction in overall vehicle towing costs; |
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convenient local facilities; |
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improved access to buyers throughout the world; |
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a prompt response in the event of a natural disaster or other catastrophe; and |
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consistency in products and services. |
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Internet bidding, Internet proxy bidding, and virtual sales powered by VB2, which enhance the competitive bidding process; |
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A mobile application, which allows members to search, bid, create watchlists, join auctions and bid from anywhere; |
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online payment capabilities via our ePay product, credit cards and dealer financing programs; |
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e-mail notifications to potential buyers of vehicles that match desired characteristics; |
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sophisticated vehicle processing at storage sites, including ten-view digital imaging of each vehicle and the scanning of each vehicles title and other significant documents such as body shop invoices, all of which are available from us over the Internet; |
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CoPartfinder, our Internet-based used vehicle parts locator that provides vehicle dismantlers with greater resale opportunities for their purchases; |
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specialty sales, which allow buyers the opportunity to focus on such select types of vehicles as motorcycles, heavy equipment, boats, recreational vehicles and rental cars; |
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Interactive online counter-bidding, which allows sellers who have placed a minimum bid or a bid to be approved on a vehicle to directly counter-bid the current high bidder; |
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2nd chance bidding, which allows the second highest bidder the opportunity to purchase the vehicle for the sellers current minimum bid after the high bidder declines; and |
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Night Cap sales, which provides an additional opportunity for bidding on vehicles that did not achieve their minimum bid during the virtual sale, counter bidding, or 2nd chance bidding. |
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expand our global presence; |
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strengthen our networks and access new markets; |
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utilize our existing corporate and technology infrastructure over a larger base of operations; and |
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introduce our comprehensive services and operational expertise. |
North America |
United Kingdom |
Other |
Total Employees |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
3,010 |
682 |
183 |
3,875 |
Item 1A. |
Risk Factors |
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the difficulty of managing and staffing foreign offices and the increased travel, infrastructure and legal compliance costs associated with multiple international locations; |
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the need to localize our product offerings, particularly the need to implement our online auction platform in foreign countries; |
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tariffs and trade barriers and other regulatory or contractual limitations on our ability to operate in certain foreign markets; |
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exposure to foreign currency exchange rate risk, which may have an adverse impact on our revenues and revenue growth rates; |
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adapting to different business cultures and market structures, particularly where we seek to implement our auction model in markets where insurers have historically not played a substantial role in the disposition of salvage vehicles; |
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repatriation of funds currently held in foreign jurisdictions to the U.S. may result in higher effective tax rates. |
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continue to acquire additional facilities on favorable terms; |
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expand existing facilities in no-growth regulatory environments; |
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increase revenues and profitability at acquired and new facilities; |
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maintain the historical revenue and earnings growth rates we have been able to obtain through facility openings and strategic acquisitions; or |
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create new vehicle storage facilities that meet our current revenue and profitability requirements. |
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hire, train and manage additional qualified personnel; |
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establish new relationships or expand existing relationships with vehicle sellers; |
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identify and acquire or lease suitable premises on competitive terms; |
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secure adequate capital; and |
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maintain the supply of vehicles from vehicle sellers. |
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fluctuations in the market value of salvage and used vehicles; |
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the impact of foreign exchange gain and loss as a result of international operations; |
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our ability to successfully integrate our newly acquired operations in international markets and any additional markets we may enter; |
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the availability of salvage vehicles; |
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variations in vehicle accident rates; |
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member participation in the Internet bidding process; |
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delays or changes in state title processing; |
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changes in international, state or federal laws or regulations affecting salvage vehicles; |
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changes in local laws affecting who may purchase salvage vehicles; |
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our ability to integrate and manage our acquisitions successfully; |
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the timing and size of our new facility openings; |
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the announcement of new vehicle supply agreements by us or our competitors; |
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the severity of weather and seasonality of weather patterns; |
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the amount and timing of operating costs and capital expenditures relating to the maintenance and expansion of our business, operations and infrastructure; |
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the availability and cost of general business insurance; |
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labor costs and collective bargaining; |
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changes in the current levels of out of state and foreign demand for salvage vehicles; |
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the introduction of a similar Internet product by a competitor; |
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the ability to obtain necessary permits to operate; and |
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the impact of our conversion to a new ERP system, if the conversion is not executed efficiently and effectively. |
Item 1B. |
Unresolved Staff Comments |
Item 2. |
Properties |
Item 3. |
Legal Proceedings |
Item 4. |
Mine Safety Disclosure |
Item 5. |
Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
Fiscal Year 2013 |
High |
Low |
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---|---|---|---|---|---|---|---|---|---|---|
Fourth Quarter |
38.26 | 30.11 | ||||||||
Third Quarter |
36.93 | 31.30 | ||||||||
Second Quarter |
37.47 | 28.39 | ||||||||
First Quarter |
28.98 | 23.28 |
Fiscal Year 2012 |
High |
Low |
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---|---|---|---|---|---|---|---|---|---|---|
Fourth Quarter |
27.88 | 22.59 | ||||||||
Third Quarter |
26.84 | 22.58 | ||||||||
Second Quarter |
24.55 | 20.82 | ||||||||
First Quarter |
22.55 | 17.88 |
Period |
Total Number of Shares Purchased |
Average Price Paid Per Share |
Total Number of Shares Purchased as Part of Publicly Announced Program |
Maximum Number of Shares That May Yet Be Purchased Under the Program |
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Fiscal 2011 |
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First Quarter |
4,499,652 | $ | 16.83 | 4,499,652 | 25,958,908 | |||||||||||||
Second Quarter |
24,344,176 | $ | 19.00 | | 25,958,908 | |||||||||||||
Third Quarter |
2,883,084 | $ | 21.52 | 2,883,084 | 23,075,824 | |||||||||||||
Fourth Quarter |
5,981,898 | $ | 22.59 | 5,981,898 | 17,093,926 | |||||||||||||
Fiscal 2012 |
||||||||||||||||||
First Quarter |
2,139,796 | $ | 20.26 | 2,139,796 | 54,954,130 | |||||||||||||
Second Quarter |
3,940,912 | $ | 23.37 | 3,940,912 | 51,013,218 | |||||||||||||
Third Quarter |
| | | 51,013,218 | ||||||||||||||
Fourth Quarter |
2,800,000 | $ | 23.22 | 2,800,000 | 48,213,218 | |||||||||||||
Fiscal 2013 |
||||||||||||||||||
First Quarter |
500,000 | $ | 27.77 | 500,000 | 47,713,218 | |||||||||||||
Second Quarter |
| | | 47,713,218 | ||||||||||||||
Third Quarter |
| | | 47,713,218 | ||||||||||||||
May 1, 2013 through May 31, 2013 |
| | | 47,713,218 | ||||||||||||||
June 1, 2013 through June 30, 2013 |
| | | 47,713,218 | ||||||||||||||
July 1, 2013 through July 31, 2013 |
| | | 47,713,218 |
Period |
Options Exercised |
Exercise Price |
Shares Net Settled for Exercise |
Shares Withheld for Taxes(1) |
Net Shares to Employee |
Share Price for Withholding |
Tax Withholding (in 000s) |
|||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
FY 2011Q2 |
177,500 | $ | 8.47 | 76,050 | 37,834 | 63,616 | $ | 19.76 | $ | 748 | ||||||||||||||||||||
FY 2011Q3 |
548,334 | $ | 11.02 | 295,496 | 118,032 | 134,806 | $ | 20.40 | $ | 2,408 | ||||||||||||||||||||
FY 2011Q4 |
180,000 | $ | 9.48 | 76,396 | 48,366 | 55,238 | $ | 22.33 | $ | 1,080 | ||||||||||||||||||||
FY 2012Q1 |
40,000 | $ | 9.00 | 16,082 | 8,974 | 14,944 | $ | 22.39 | $ | 201 | ||||||||||||||||||||
FY 2012Q2 |
20,000 | $ | 9.00 | 7,506 | 4,584 | 7,910 | $ | 23.98 | $ | 110 | ||||||||||||||||||||
FY 2012Q3 |
322,520 | $ | 10.74 | 131,299 | 85,683 | 105,538 | $ | 26.38 | $ | 2,260 | ||||||||||||||||||||
FY 2013Q2 |
73,228 | $ | 8.89 | 18,127 | 17,461 | 37,640 | $ | 35.91 | $ | 627 |
(1) |
Shares withheld for taxes are treated as a repurchase of shares for accounting purposes but do not count against our stock repurchase program. |
7/08 |
7/09 |
7/10 |
7/11 |
7/12 |
7/13 |
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Copart, Inc. |
$ | 100.00 | $ | 80.51 | $ | 83.08 | $ | 99.07 | $ | 108.34 | $ | 148.24 | ||||||||||||||
NASDAQ Composite |
$ | 100.00 | $ | 86.02 | $ | 92.70 | $ | 114.49 | $ | 123.84 | $ | 155.80 | ||||||||||||||
NASDAQ Industrial |
$ | 100.00 | $ | 81.18 | $ | 98.49 | $ | 132.68 | $ | 136.59 | $ | 187.49 | ||||||||||||||
NASDAQ Q-50 (NXTQ) |
$ | 100.00 | $ | 77.47 | $ | 87.18 | $ | 99.77 | $ | 102.40 | $ | 151.88 |
* |
Assumes that $100.00 was invested on July 31, 2008 in our common stock, in the NASDAQ Composite Index, the NASDAQ Industrial Index and the NASDAQ Q-50 (NXTQ), and that all dividends were reinvested. No dividends have been declared on our common stock. Stockholder returns over the indicated period should not be considered indicative of future stockholder returns. |
Item 6. |
Selected Financial Data |
Fiscal Years Ending July 31, |
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---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2013 |
2012 |
2011* |
2010 |
2009 |
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(in thousands, except per share) | |||||||||||||||||||||||
Operating Data |
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Revenues |
$ | 1,046,386 | $ | 924,191 | $ | 872,246 | $ | 772,879 | $ | 743,082 | |||||||||||||
Operating income |
282,992 | 286,353 | 265,290 | 239,070 | 225,325 | ||||||||||||||||||
Income from continuing operations before income taxes |
276,872 | 278,056 | 263,877 | 239,495 | 227,732 | ||||||||||||||||||
Income tax expense |
(96,847 | ) | (95,937 | ) | (97,502 | ) | (87,868 | ) | (88,186 | ) | |||||||||||||
Income from continuing operations |
180,025 | 182,119 | 166,375 | 151,627 | 139,546 | ||||||||||||||||||
Income from discontinued operations, net of income tax effects |
| | | | 1,557 | ||||||||||||||||||
Net income |
180,025 | 182,119 | 166,375 | 151,627 | 141,103 | ||||||||||||||||||
Basic per share amounts: |
|||||||||||||||||||||||
Income from continuing operations |
$ | 1.44 | $ | 1.42 | $ | 1.10 | $ | 0.90 | $ | 0.84 | |||||||||||||
Discontinued operations |
| | | | 0.01 | ||||||||||||||||||
Net income per share |
$ | 1.44 | $ | 1.42 | $ | 1.10 | $ | 0.90 | $ | 0.85 | |||||||||||||
Weighted average shares |
124,912 | 128,120 | 151,298 | 168,330 | 167,074 | ||||||||||||||||||
Diluted per share amounts: |
|||||||||||||||||||||||
Income from continuing operations |
$ | 1.39 | $ | 1.39 | $ | 1.08 | $ | 0.89 | $ | 0.82 | |||||||||||||
Discontinued operations |
| | | | 0.01 | ||||||||||||||||||
Net income per share |
$ | 1.39 | $ | 1.39 | $ | 1.08 | $ | 0.89 | $ | 0.83 | |||||||||||||
Weighted average shares |
129,781 | 131,428 | 153,352 | 170,054 | 169,860 | ||||||||||||||||||
Balance Sheet Data |
|||||||||||||||||||||||
Cash, cash equivalents and short-term investments |
$ | 63,631 | $ | 140,112 | $ | 74,009 | $ | 268,188 | $ | 162,691 | |||||||||||||
Working capital |
67,893 | 134,908 | 75,242 | 330,191 | 212,349 | ||||||||||||||||||
Total assets |
1,334,481 | 1,154,000 | 1,084,436 | 1,228,812 | 1,058,032 | ||||||||||||||||||
Total debt |
372,457 | 444,120 | 375,756 | 975 | 1,457 | ||||||||||||||||||
Stockholders equity |
762,401 | 561,117 | 555,172 | 1,087,234 | 921,459 |
* |
As a result of the adoption of Accounting Standards Update 200913, Revenue Arrangements with Multiple Deliverables, for the year ended July 31, 2011, we accelerated recognition of $14.4 million in service revenue and $13.5 million in related yard operation expenses. |
Item 7. |
Managements Discussion and Analysis of Financial Condition and Results of Operations |
Locations |
Acquisition or Greenfield |
Date |
Geographic Service Area |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Homestead, Florida |
Greenfield |
September 2010 |
United States |
|||||||||||
Hartford City, Indiana |
Acquisition |
March 2011 |
United States |
|||||||||||
Atlanta, Georgia |
Greenfield |
August 2011 |
United States |
|||||||||||
Burlington, North Carolina |
Greenfield |
July 2012 |
United States |
|||||||||||
Webster, New Hampshire |
Greenfield |
September 2012 |
United States |
|||||||||||
Gainesville, Georgia |
Acquisition |
May 2013 |
United States |
|||||||||||
Davison, Michigan |
Acquisition |
May 2013 |
United States |
|||||||||||
Ionia, Michigan |
Acquisition |
May 2013 |
United States |
|||||||||||
Kincheloe, Michigan |
Acquisition |
May 2013 |
United States |
|||||||||||
Salvage Parent, Inc.* |
Acquisition |
May 2013 |
United States |
|||||||||||
Birmingham, England |
Acquisition |
March 2011 |
United Kingdom |
|||||||||||
Edmonton, Canada |
Acquisition |
May 2012 |
Canada |
|||||||||||
Calgary, Canada |
Acquisition |
May 2012 |
Canada |
|||||||||||
Dubai, U.A.E. . |
Acquisition |
August 2012 |
United Arab Emirates |
|||||||||||
Embu, Brazil |
Acquisition |
November 2012 |
Brazil |
|||||||||||
Pirapora, Brazil |
Acquisition |
November 2012 |
Brazil |
|||||||||||
Osasco, Brazil |
Acquisition |
November 2012 |
Brazil |
|||||||||||
Castelo Branco, Brazil |
Acquisition |
November 2012 |
Brazil |
Locations |
Acquisition or Greenfield |
Date |
Geographic Service Area | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Vila Jaguara, Brazil |
Acquisition |
November 2012 |
Brazil |
|||||||||||
Ettlingen, Germany |
Acquisition |
November 2012 |
Germany |
|||||||||||
Cordoba, Spain |
Acquisition |
June 2013 |
Spain |
* |
Salvage Parent, Inc. conducts business primarily as Quad City Salvage Auction, Crashed Toys, and Desert View Auto Auctions. Combined, these businesses operate at 39 locations in 14 states. |
2013 |
Percentage of Revenue |
2012 |
Percentage of Revenue |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Service revenues |
$ | 849,667 | 81 | % | $ | 757,272 | 82 | % | ||||||||||
Vehicle sales |
196,719 | 19 | % | 166,919 | 18 | % | ||||||||||||
$ | 1,046,386 | 100 | % | $ | 924,191 | 100 | % |
2012 |
Percentage of Revenue |
2011 |
Percentage of Revenue |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Service revenues |
$ | 757,272 | 82 | % | $ | 713,093 | 82 | % | ||||||||||
Vehicle sales |
166,919 | 18 | % | 159,153 | 18 | % | ||||||||||||
$ | 924,191 | 100 | % | $ | 872,246 | 100 | % |
Period |
Options Exercised |
Exercise Price |
Shares Net Settled for Exercise |
Shares Withheld for Taxes(1) |
Net Shares to Employee |
Share Price for Withholding |
Tax Withholding (in 000s) |
|||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
FY 2011Q2 |
177,500 | $ | 8.47 | 76,050 | 37,834 | 63,616 | $ | 19.76 | $ | 748 | ||||||||||||||||||||
FY 2011Q3 |
548,334 | $ | 11.02 | 295,496 | 118,032 | 134,806 | $ | 20.40 | $ | 2,408 | ||||||||||||||||||||
FY 2011Q4 |
180,000 | $ | 9.48 | 76,396 | 48,366 | 55,238 | $ | 22.33 | $ | 1,080 | ||||||||||||||||||||
FY 2012Q1 |
40,000 | $ | 9.00 | 16,082 | 8,974 | 14,944 | $ | 22.39 | $ | 201 | ||||||||||||||||||||
FY 2012Q2 |
20,000 | $ | 9.00 | 7,506 | 4,584 | 7,910 | $ | 23.98 | $ | 110 | ||||||||||||||||||||
FY 2012Q3 |
322,520 | $ | 10.74 | 131,299 | 85,683 | 105,538 | $ | 26.38 | $ | 2,260 | ||||||||||||||||||||
FY 2013Q2 |
73,228 | $ | 8.89 | 18,127 | 17,461 | 37,640 | $ | 35.91 | $ | 627 |
(1) |
Shares withheld for taxes are treated as a repurchase of shares for accounting purposes but do not count against our stock repurchase program. |
Payments Due By Period |
|||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Contractual Obligations |
Total |
Less than 1 Year |
13 Years |
35 Years |
More than 5 Years |
Other |
|||||||||||||||||||||
Long-term debt including current portion |
$ | 368,750 | $ | 75,000 | $ | 293,750 | $ | | $ | | $ | | |||||||||||||||
Interest payments on long-term debt including current portion |
15,073 | 7,603 | 7,470 | | | | |||||||||||||||||||||
Operating leases(1) |
131,179 | 23,162 | 33,836 | 26,121 | 48,060 | | |||||||||||||||||||||
Capital leases(1) |
297 | 229 | 68 | | | | |||||||||||||||||||||
Tax liabilities(2) |
23,091 | | | | | 23,091 | |||||||||||||||||||||
Total contractual obligations |
$ | 538,390 | $ | 105,994 | $ | 335,124 | $ | 26,121 | $ | 48,060 | $ | 23,091 |
Amount of Commitment Expiration Per Period |
|||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Commercial Commitments(3) |
Total |
Less than 1 Year |
13 Years |
35 Years |
More than 5 Years |
Other |
|||||||||||||||||||||
Letters of credit |
$ | 18,776 | $ | 18,776 | $ | | $ | | $ | | $ | |
(1) |
Contractual obligations consist of future non-cancelable minimum lease payments under capital and operating leases, used in the normal course of business. |
(2) |
Tax liabilities include the long-term liabilities in the consolidated balance sheet for unrecognized tax positions. At this time we are unable to make a reasonably reliable estimate of the timing of payments in individual years beyond 12 months due to uncertainties in the timing of tax audit outcomes. |
(3) |
Commercial commitments consist primarily of letters of credit provided for insurance programs and certain business transactions. |
Years Ended July 31, |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2013 |
2012 |
2011 |
|||||||||||||
General and Administrative |
|||||||||||||||
Severance |
$ | 1,423 | $ | 1,675 | $ | 1,190 | |||||||||
Relocation |
314 | 534 | | ||||||||||||
Total general and administrative |
$ | 1,737 | $ | 2,209 | $ | 1,190 | |||||||||
Yard Operations |
|||||||||||||||
Severance |
$ | | $ | | $ | | |||||||||
Relocation |
189 | 745 | 183 | ||||||||||||
Impairment |
| 1,123 | | ||||||||||||
Total yard operations |
$ | 189 | $ | 1,868 | $ | 183 |
(i) |
provide updated guidance on whether multiple deliverables exist, how the deliverables in an arrangement should be separated, and how the arrangement consideration should be allocated; |
(ii) |
require an entity to allocate consideration in an arrangement using its best estimate of selling prices (BSP) of deliverables if a vendor does not have vendor-specific objective evidence of selling price (VSOE) or third-party evidence of selling price (TPE); and |
(iii) |
eliminate the use of the residual method and require an entity to allocate arrangement consideration using the relative selling price method. |
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. Interest rate hedges are valued at exit prices obtained from the counter-party. |
Level III |
Inputs that are generally unobservable. These inputs may be used with internally developed methodologies that result in
managements best estimate |
Item 7A. |
Quantitative and Qualitative Disclosures About Market Risk |
Item 8. |
Financial Statements and Supplementary Data |
Item 9. |
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure |
Item 9A. |
Controls and Procedures |
Item 9B. |
Other Information |
Item
10. |
Directors, Executive Officers of the Registrant and Corporate Governance |
1. |
From our main web page, click on Company Info. |
2. |
Next, click on Investor Relations. |
3. |
Finally, click on Code of Ethics for Principal Executive and Senior Financial Officers. |
Item
11. |
Executive Compensation |
Item
12. |
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
Item
13. |
Certain Relationships and Related Transactions, and Director Independence |
Item
14. |
Principal Accountant Fees and Services |
Item
15. |
Exhibits and Financial Statement Schedules |
Page |
||||||||||
---|---|---|---|---|---|---|---|---|---|---|
(a) 1. |
Financial Statements: Index to Consolidated Financial Statements |
|||||||||
Report of Independent Registered Public Accounting Firm |
58 | |||||||||
Consolidated Balance Sheets at July 31, 2013 and 2012 |
59 | |||||||||
Consolidated Statements of Income for the years ended July 31, 2013, 2012 and 2011 |
60 | |||||||||
Consolidated Statements of Comprehensive Income for the years ended July 31, 2013, 2012 and 2011 |
61 | |||||||||
Consolidated Statements of Stockholders Equity for the years ended July 31, 2013, 2012 and 2011 |
62 | |||||||||
Consolidated Statements of Cash Flows for the years ended July 31, 2013, 2012 and 2011 |
63 | |||||||||
Notes to Consolidated Financial Statements |
64 | |||||||||
2. |
Financial Statement Schedules: All schedules are omitted because they are not applicable or the required information
is shown in the consolidated financial statements or notes thereto. |
|||||||||
3. |
Exhibits: The following Exhibits are filed as part of, or incorporated by reference into this
report. |
Incorporated by reference herein |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Exhibit Number |
|
Description |
|
Form |
|
Date |
|||||||||
3.1 |
Copart, Inc. Certificate of Incorporation |
Current Report on Form 8-K, (File No. 000-23255), Exhibit No. 3.1 |
January 10, 2012 |
||||||||||||
3.2 |
Bylaws of Copart, Inc. |
Current Report on Form 8-K, (File No. 000-23255), Exhibit No. 3.2 |
January 10, 2012 |
||||||||||||
4.1 |
Preferred Stock Rights Agreement, dated as of March 6, 2003, between Copart and Equiserve Trust Company N.A., including the
Certificate of Determination, the form of Rights Certificate and the Summary of Rights attached thereto as Exhibits A, B and C,
respectively |
8/A-12/G (File No. 000-23255), Exhibit No. 4.1 |
March 11, 2003 |
||||||||||||
4.2 |
Amendment to Preferred Stock Rights Agreement, as of March 14, 2006, between the Registrant and Computershare Trust Company, N.A.
(formerly Equiserve Trust Company, N.A.) |
8/A-12G/A (File No. 000-23255), Exhibit 4.2 |
March 15, 2006 |
||||||||||||
4.3 |
Amendment to Preferred Stock Rights Agreement, as of January 10, 2013, between the Registrant and Computershare Trust Company, N.A.
(formerly Equiserve Trust Company, N.A.) |
8/A-12G/A (File No. 000-23255), Exhibit 4.3 |
January 10, 2012 |
Incorporated by reference herein |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Exhibit Number |
|
Description |
|
Form |
|
Date | |||||||||
10.1* |
Copart Inc. 2001 Stock Option Plan |
Registration Statement on Form S-8 (File No. 333-90612), Exhibit No. 4.1 |
June 17, 2002 |
||||||||||||
10.2* |
Copart Inc. 2007 Equity Incentive Plan (2007 EIP) |
Current Report on Form 8-K (File No. 000-23255), Exhibit No. 10.1 |
December 12, 2007 |
||||||||||||
10.3* |
Form of Performance Share Award Agreement for use with 2007 EIP |
Current Report on Form 8-K (File No. 000-23255), Exhibit No. 10.2 |
December 12, 2007 |
||||||||||||
10.4* |
Form of Restricted Stock Unit Award Agreement for use with 2007 EIP |
Current Report on Form 8-K (File No. 000-23255), Exhibit No. 10.3 |
December 12, 2007 |
||||||||||||
10.5* |
Form of Stock Option Award Agreement for use with 2007 EIP |
Current Report on Form 8-K (File No. 000-23255), Exhibit No. 10.5 |
December 12, 2007 |
||||||||||||
10.6* |
Form of Restricted Stock Award Agreement for use with 2007 EIP |
Current Report on Form 8-K (File No. 000-23255), Exhibit No. 10.4 |
December 12, 2007 |
||||||||||||
10.7 |
Credit Agreement dated as of December 14, 2010 by and between the Registrant and Bank of America, N.A. |
Current Report on Form 8-K (File No. 000-23255), Exhibit No. 10.1 |
December 15, 2010 |
||||||||||||
10.8 |
Amendment to Credit Agreement between and between the Registrant and Bank of America, N.A., dated as of September 29,
2011 |
Current Report on Form 8-K (File No. 000-23255), Exhibit No. 10.13b |
October 4, 2011 |
||||||||||||
10.9* |
Copart, Inc. Executive Bonus Plan |
Current Report on Form 8-K (File No. 000-23255), Exhibit No. 10.13 |
August 3, 2006 |
||||||||||||
10.10* |
Amended and Restated Executive Officer Employment Agreement between the Registrant and William E. Franklin, dated September 25,
2008 |
Quarterly Report on Form 10-Q (File No. 000-23255), Exhibit No. 10.1 |
December 10, 2008 |
||||||||||||
10.11* |
Form of Copart, Inc. Stand-Alone Stock Option Award Agreement for grant of options to purchase 2,000,000 shares of the
Registrants common stock to each of Willis J. Johnson and A. Jayson Adair |
Registration Statement on Form S-8 (File No. 333-159946), Exhibit No. 4.1 |
June 12, 2009 |
Incorporated by reference herein |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Exhibit Number |
|
Description |
|
Form |
|
Date | |||||||||
10.12* |
Amendment dated June 9, 2010 to Option Agreements dated June 6, 2001, October 21, 2002 and August 19, 2003 between the Registrant and
Willis J. Johnson |
Annual Report on Form 10-K (File No. 000-23255), Exhibit No. 10-17 |
September 23, 2010 |
||||||||||||
10.13 |
Executive Officer Employment Agreement between the Registrant and Thomas Wylie, dated September 25, 2008 |
Current Report on Form 8-K (File No. 000-23255), Exhibit No. 10.2 |
December 15, 2010 |
||||||||||||
10.14 |
Executive Officer Employment Agreement between the Registrant and Vincent Phillips, dated April 12, 2010 |
Current Report on Form 8-K (File No. 000-23255), Exhibit No. 10.4 |
December 15, 2010 |
||||||||||||
10.15 |
Standard Industrial/Commercial single tenant lease-net dated January 3, 2011 between Partnership HealthPlan of California and the
Registrant |
Annual Report on Form 10-K (File No. 000-23254), Exhibit No. 10.21 |
September 28, 2011 |
||||||||||||
10.16* |
Form of Indemnification Agreement signed by executive officers and directors |
Annual Report on Form 10-K (File No. 000-23255), Exhibit No. 10.17 |
October 1, 2012 |
||||||||||||
10.17 |
Standard Industrial/Commercial single tenant lease-net dated February 3, 2013 between Garden Centura, L.P. and the
Registrant |
Annual Report on Form 10-K (File No. 000-23255), Exhibit No. 10.18 |
October 1, 2012 |
||||||||||||
10.18 |
Executive Officer Employment Agreement between the Registrant and John Lindle, dated June 1, 2013 |
|
Filed herewith |
||||||||||||
14.01 |
Code of Ethics for Principal Executive and Senior Financial Officers |
Annual Report on Form 10-K (File No. 000-23254), Exhibit No. 14-01 |
October 17, 2003 |
||||||||||||
21.1 |
List of subsidiaries of Registrant |
|
Filed herewith |
||||||||||||
23.1 |
Consent of Independent Registered Public Accounting Firm |
|
Filed herewith |
||||||||||||
24.1 |
Power of Attorney (included on signature page) |
|
Filed herewith |
||||||||||||
31.1 |
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
Filed herewith |
||||||||||||
31.2 |
Certification of Chief 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 |
|
Filed herewith |
Incorporated by reference herein |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Exhibit Number |
|
Description |
|
Form |
|
Date | |||||||||
101.INS |
XBRL Instance Document |
||||||||||||||
101.SCH |
XBRL Taxonomy Extension Schema Document |
||||||||||||||
101.CAL |
XBRL Taxonomy Extension Calculation Linkbase Document |
||||||||||||||
101.DEF |
XBRL Extension Definition |
||||||||||||||
101.LAB |
XBRL Taxonomy Extension Label Linkbase Document |
||||||||||||||
101.PRE |
XBRL Taxonomy Extension Presentation Linkbase Document |
(1) |
In
accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release No. 33-8238 and 34-47986, Final Rule: Managements Reports on Internal
Control Over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports, the certifications furnished in Exhibits 32.1 and
32.2 hereto are deemed to accompany this Form 10-K and will not be deemed filed for purposes of Section 18 of the Exchange Act. Such
certifications will not be deemed to be incorporated by reference into any filings under the Securities Act or the Exchange Act, except to the extent
that the registrant specifically incorporates it by reference. |
* |
Management contract, plan or arrangement |
Registrant |
||||||||||
COPART, INC. |
||||||||||
By: |
/s/ A. JAYSON
ADAIR |
|||||||||
A. Jayson Adair Chief Executive Officer |
COPART, INC. |
||||||||||
By: |
/s/ WILLIAM E.
FRANKLIN |
|||||||||
William E. Franklin Chief Financial Officer |
Signature |
|
Capacity in Which Signed |
|
Date |
||||||
---|---|---|---|---|---|---|---|---|---|---|
/s/ A. JAYSON ADAIR A. Jayson Adair |
Chief Executive Officer (Principal Executive Officer and Director) |
September 30, 2013 |
||||||||
/s/ WILLIAM E. FRANKLIN William E. Franklin |
Senior Vice President of Finance and Chief Financial Officer (Principal Financial and Accounting Officer) |
September 30, 2013 |
||||||||
/s/ WILLIS J. JOHNSON Willis J. Johnson |
Chairman of the Board |
September 30, 2013 |
||||||||
/s/ JAMES E. MEEKS James E. Meeks |
Director |
September 30, 2013 |
||||||||
/s/ STEVEN D. COHAN Steven D. Cohan |
Director |
September 30, 2013 |
||||||||
/s/ DANIEL ENGLANDER Daniel Englander |
Director |
September 30, 2013 |
||||||||
/s/ THOMAS N. TRYFOROS Thomas N. Tryforos |
Director |
September 30, 2013 |
||||||||
/s/ MATT BLUNT Matt Blunt |
Director |
September 30, 2013 |
||||||||
/s/ VINCENT W. MITZ Vincent W. Mitz |
President and Director |
September 30, 2013 |
July 31, 2013 |
July 31, 2012 |
||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
ASSETS |
|||||||||||
Current assets: |
|||||||||||
Cash and cash equivalents |
$ | 63,631 | $ | 140,112 | |||||||
Accounts receivable, net |
182,714 | 137,900 | |||||||||
Vehicle pooling costs |
20,466 | 15,728 | |||||||||
Inventories |
10,736 | 8,494 | |||||||||
Income taxes receivable |
9,416 | 2,312 | |||||||||
Deferred income taxes |
2,216 | 3,600 | |||||||||
Prepaid expenses and other assets |
15,344 | 9,155 | |||||||||
Assets held for sale |
1,929 | 3,926 | |||||||||
Total current assets |
306,452 | 321,227 | |||||||||
Property and equipment, net |
677,517 | 587,163 | |||||||||
Intangibles, net |
17,706 | 7,985 | |||||||||
Goodwill |
267,463 | 196,438 | |||||||||
Deferred income taxes |
30,117 | 22,280 | |||||||||
Other assets |
35,226 | 18,907 | |||||||||
Total assets |
$ | 1,334,481 | $ | 1,154,000 | |||||||
LIABILITIES AND STOCKHOLDERS EQUITY |
|||||||||||
Current liabilities: |
|||||||||||
Accounts payable and accrued liabilities |
$ | 136,648 | $ | 102,677 | |||||||
Bank overdraft |
16,291 | | |||||||||
Deferred revenue |
4,832 | 5,390 | |||||||||
Income taxes payable |
4,741 | 3,082 | |||||||||
Current portion of long-term debt and capital lease obligations |
76,047 | 75,170 | |||||||||
Total current liabilities |
238,559 | 186,319 | |||||||||
Deferred income taxes |
8,071 | 7,186 | |||||||||
Income taxes payable |
23,091 | 22,531 | |||||||||
Long-term debt and capital lease obligations |
296,410 | 368,950 | |||||||||
Other liabilities |
5,949 | 7,897 | |||||||||
Total liabilities |
572,080 | 592,883 | |||||||||
Commitments and contingencies |
|||||||||||
Stockholders equity: |
|||||||||||
Preferred stock, $0.0001 par value 5,000,000 shares authorized; no shares issued and outstanding at July 31, 2013 and July 31, 2012,
respectively |
| | |||||||||
Common stock, $0.0001 par value 180,000,000 shares authorized; 125,494,995 and 124,393,700 shares issued and outstanding at July 31, 2013
and 2012, respectively |
13 | 12 | |||||||||
Additional paid-in capital |
368,769 | 326,187 | |||||||||
Accumulated other comprehensive loss |
(47,161 | ) | (38,043 | ) | |||||||
Retained earnings |
440,780 | 272,961 | |||||||||
Total stockholders equity |
762,401 | 561,117 | |||||||||
Total liabilities and stockholders equity |
$ | 1,334,481 | $ | 1,154,000 |
Years Ended July 31, |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2013 |
2012 |
2011 |
|||||||||||||
Service revenues and vehicle sales: |
|||||||||||||||
Service revenues |
$ | 849,667 | $ | 757,272 | $ | 713,093 | |||||||||
Vehicle sales |
196,719 | 166,919 | 159,153 | ||||||||||||
Total service revenues and vehicle sales |
1,046,386 | 924,191 | 872,246 | ||||||||||||
Operating costs and expenses: |
|||||||||||||||
Yard operations |
458,228 | 377,604 | 374,149 | ||||||||||||
Cost of vehicle sales |
167,236 | 136,971 | 125,202 | ||||||||||||
General and administrative |
137,930 | 114,492 | 107,605 | ||||||||||||
Impairment of long-lived assets |
| 8,771 | | ||||||||||||
Total operating costs and expenses |
763,394 | 637,838 | 606,956 | ||||||||||||
Operating income |
282,992 | 286,353 | 265,290 | ||||||||||||
Other (expense) income: |
|||||||||||||||
Interest expense |
(10,267 | ) | (11,341 | ) | (4,078 | ) | |||||||||
Interest income |
638 | 357 | 493 | ||||||||||||
Other income, net |
3,509 | 2,687 | 2,172 | ||||||||||||
Total other expense |
(6,120 | ) | (8,297 | ) | (1,413 | ) | |||||||||
Income before income taxes |
276,872 | 278,056 | 263,877 | ||||||||||||
Income taxes |
96,847 | 95,937 | 97,502 | ||||||||||||
Net income |
$ | 180,025 | $ | 182,119 | $ | 166,375 | |||||||||
Earnings per share basic |
|||||||||||||||
Basic net income per share |
$ | 1.44 | $ | 1.42 | $ | 1.10 | |||||||||
Weighted average common shares outstanding |
124,912 | 128,120 | 151,298 | ||||||||||||
Earnings per share diluted |
|||||||||||||||
Diluted net income per share |
$ | 1.39 | $ | 1.39 | $ | 1.08 | |||||||||
Diluted weighted average common shares outstanding |
129,781 | 131,428 | 153,352 |
Years Ended July 31, |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2013 |
2012 |
2011 |
|||||||||||||
Net income, as reported |
$ | 180,025 | $ | 182,119 | $ | 166,375 | |||||||||
Other comprehensive income: |
|||||||||||||||
Unrealized gain (loss) on interest rate swaps, net of tax effects of $(1,647), $1,045, and $0 |
2,993 | (1,749 | ) | | |||||||||||
Reclassification adjustment of interest rate swaps to net income, net of tax effects of $874, $717, and $0 |
(1,624 | ) | (1,361 | ) | | ||||||||||
Foreign currency translation adjustments |
(10,487 | ) | (11,708 | ) | 9,516 | ||||||||||
Total comprehensive income |
$ | 170,907 | $ | 167,301 | $ | 175,891 |
Common Stock |
||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Outstanding Shares |
Amount |
Additional Paid in Capital |
Accumulated Other Comprehensive Income (Loss) |
Retained Earnings |
Stockholders Equity |
|||||||||||||||||||||
Balances at July 31, 2010 |
168,726,126 | 17 | 365,490 | (32,741 | ) | 754,468 | 1,087,234 | |||||||||||||||||||
Net income |
| | | | 166,375 | 166,375 | ||||||||||||||||||||
Currency translation adjustment |
| | | 9,516 | | 9,516 | ||||||||||||||||||||
Exercise of stock options, net of repurchased shares |
866,526 | | 6,486 | | (3,639 | ) | 2,847 | |||||||||||||||||||
Employee stock-based compensation and related tax benefit |
| | 22,645 | | | 22,645 | ||||||||||||||||||||
Shares issued for Employee Stock Purchase Plan |
127,192 | | 1,957 | | | 1,957 | ||||||||||||||||||||
Shares repurchased |
(37,708,810 | ) | (4 | ) | (82,651 | ) | | (652,747 | ) | (735,402 | ) | |||||||||||||||
Balances at July 31, 2011 |
132,011,034 | 13 | 313,927 | (23,225 | ) | 264,457 | 555,172 | |||||||||||||||||||
Net income |
| | | | 182,119 | 182,119 | ||||||||||||||||||||
Currency translation adjustment |
| | | (11,708 | ) | | (11,708 | ) | ||||||||||||||||||
Interest rate swap, net of tax effects |
| | | (3,110 | ) | | (3,110 | ) | ||||||||||||||||||
Exercise of stock options, net of repurchased shares |
1,165,605 | | 13,202 | | (2,777 | ) | 10,425 | |||||||||||||||||||
Employee stock-based compensation and related tax benefit |
| | 26,158 | | | 26,158 | ||||||||||||||||||||
Shares issued for Employee Stock Purchase Plan |
97,769 | | 1,957 | | | 1,957 | ||||||||||||||||||||
Shares repurchased |
(8,880,708 | ) | (1 | ) | (29,057 | ) | | (170,838 | ) | (199,896 | ) | |||||||||||||||
Balances at July 31, 2012 |
124,393,700 | $ | 12 | $ | 326,187 | $ | (38,043 | ) | $ | 272,961 | $ | 561,117 | ||||||||||||||
Net income |
| | | | 180,025 | 180,025 | ||||||||||||||||||||
Currency translation adjustment |
| | | (10,487 | ) | | (10,487 | ) | ||||||||||||||||||
Interest rate swap, net of tax effects |
| | | 1,369 | | 1,369 | ||||||||||||||||||||
Exercise of stock options, net of repurchased shares |
1,516,534 | 1 | 21,370 | | (943 | ) | 20,428 | |||||||||||||||||||
Employee stock-based compensation and related tax benefit |
| | 21,886 | | | 21,886 | ||||||||||||||||||||
Shares issued for Employee Stock Purchase Plan |
84,761 | | 1,948 | | | 1,948 | ||||||||||||||||||||
Shares repurchased |
(500,000 | ) | | (2,622 | ) | | (11,263 | ) | (13,885 | ) | ||||||||||||||||
Balances at July 31, 2013 |
125,494,995 | $ | 13 | $ | 368,769 | $ | (47,161 | ) | $ | 440,780 | $ | 762,401 |
Years Ended July 31, |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2013 |
2012 |
2011 |
|||||||||||||
Cash flows from operating activities: |
|||||||||||||||
Net income |
$ | 180,025 | $ | 182,119 | $ | 166,375 | |||||||||
Adjustments to reconcile net income to net cash provided by operating activities: |
|||||||||||||||
Depreciation and amortization |
56,728 | 48,167 | 45,694 | ||||||||||||
Allowance for doubtful accounts |
(356 | ) | (192 | ) | 270 | ||||||||||
Impairment of long-lived assets |
| 8,771 | | ||||||||||||
Stock-based compensation |
19,557 | 21,791 | 19,007 | ||||||||||||
Excess tax benefits from stock-based compensation |
(6,097 | ) | (4,367 | ) | (3,547 | ) | |||||||||
(Gain)/loss on sale of property and equipment |
(962 | ) | (143 | ) | 1,882 | ||||||||||
Deferred income taxes |
(3,605 | ) | (17,579 | ) | (2,099 | ) | |||||||||
Changes in operating assets and liabilities, net of effects from acquisitions: |
|||||||||||||||
Accounts receivable |
(31,171 | ) | (16,004 | ) | (12,506 | ) | |||||||||
Vehicle pooling costs |
(3,626 | ) | 1,142 | 13,201 | |||||||||||
Inventories |
(1,777 | ) | (218 | ) | (2,666 | ) | |||||||||
Prepaid expenses and other current assets |
(5,971 | ) | 6,026 | 4,785 | |||||||||||
Other assets |
(18,714 | ) | (1,951 | ) | 739 | ||||||||||
Accounts payable and accrued liabilities |
14,749 | (3,805 | ) | 5,255 | |||||||||||
Deferred revenue |
(871 | ) | (243 | ) | (5,015 | ) | |||||||||
Income taxes receivable |
(752 | ) | 7,082 | 9,456 | |||||||||||
Income taxes payable |
1,609 | (2,545 | ) | 2,529 | |||||||||||
Other liabilities |
560 | 1,622 | (428 | ) | |||||||||||
Net cash provided by operating activities |
199,326 | 229,673 | 242,932 | ||||||||||||
Cash flows from investing activities: |
|||||||||||||||
Purchases of property and equipment |
(130,265 | ) | (54,832 | ) | (70,170 | ) | |||||||||
Proceeds from sale of property and equipment |
3,077 | 1,268 | 20,602 | ||||||||||||
Proceeds from sale of assets held for sale |
3,189 | 8,041 | | ||||||||||||
Purchases of assets and liabilities in connection with acquisitions, net of cash acquired |
(84,022 | ) | (2,564 | ) | (34,912 | ) | |||||||||
Net cash used in investing activities |
(208,021 | ) | (48,087 | ) | (84,480 | ) | |||||||||
Cash flows from financing activities: |
|||||||||||||||
Proceeds from the exercise of stock options |
21,442 | 13,651 | 7,082 | ||||||||||||
Excess tax benefits from stock-based compensation |
6,097 | 4,367 | 3,547 | ||||||||||||
Proceeds from the issuance of Employee Stock Purchase Plan shares |
1,948 | 1,957 | 1,957 | ||||||||||||
Repurchases of common stock |
(15,009 | ) | (203,285 | ) | (739,638 | ) | |||||||||
Change in bank overdraft |
16,291 | | | ||||||||||||
Proceeds from issuance of long-term debt |
| 125,000 | 400,000 | ||||||||||||
Debt offering costs |
| (313 | ) | (2,023 | ) | ||||||||||
Principal payments on long-term debt |
(96,660 | ) | (56,250 | ) | (25,000 | ) | |||||||||
Net cash used in financing activities |
(65,891 | ) | (114,873 | ) | (354,075 | ) | |||||||||
Effect of foreign currency translation |
(1,895 | ) | (610 | ) | 1,444 | ||||||||||
Net (decrease) increase in cash and cash equivalents |
(76,481 | ) | 66,103 | (194,179 | ) | ||||||||||
Cash and cash equivalents at beginning of period |
140,112 | 74,009 | 268,188 | ||||||||||||
Cash and cash equivalents at end of period |
$ | 63,631 | $ | 140,112 | $ | 74,009 | |||||||||
Supplemental disclosure of cash flow information: |
|||||||||||||||
Interest paid |
$ | 10,267 | $ | 11,333 | $ | 3,894 | |||||||||
Income taxes paid |
$ | 95,182 | $ | 106,581 | $ | 85,145 |
(1) |
Summary of Significant Accounting Policies |
Cumulative loss on foreign currency translation as of July 31, 2011 |
$ | (23,225 | ) | |||
Loss on foreign currency translation |
(11,708 | ) | ||||
Cumulative loss on foreign currency translation as of July 31, 2012 |
$ | (34,933 | ) | |||
Loss on foreign currency translation |
(10,487 | ) | ||||
Cumulative loss on foreign currency translation as of July 31, 2013 |
$ | (45,420 | ) |
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. Interest rate hedges are valued at exit prices obtained from the counter-party. |
|||||
Level III |
Inputs that are generally unobservable. These inputs may be used with internally developed methodologies that result in
managements best estimate |
July 31, 2013 |
July 31, 2012 |
July 31, 2011 |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Expected life (in years) |
5.2 6.9 | 5.2 6.8 | 5.3 6.8 | |||||||||||
Risk-free interest rate |
.61 1.5 | % | .68 1.7 | % | 1.7 2.9 | % | ||||||||
Estimated volatility |
24 26 | % | 24 26 | % | 26 31 | % | ||||||||
Expected dividends |
0 | % | 0 | % | 0 | % | ||||||||
Weighted average fair value at measurement date |
$ | 7.87 | $ | 6.01 | $ | 6.59 |
(2) |
Acquisitions |
Total cash paid, net of cash acquired |
$ | 84,022 | ||||
Contingent consideration |
3,869 | |||||
Total acquisition price |
$ | 87,891 | ||||
Allocation of the acquisition price: |
||||||
Accounts receivable and prepaid expenses |
15,348 | |||||
Deferred income taxes |
5,890 | |||||
Vehicle pooling costs |
1,187 | |||||
Property and equipment |
21,158 | |||||
Inventory |
594 | |||||
Intangible assets |
14,922 | |||||
Goodwill |
73,414 | |||||
Liabilities assumed |
(44,622 | ) | ||||
Fair value of net assets and liabilities acquired |
$ | 87,891 |
|
its future earnings and cash flow potential; |
|
the multiple to earnings, cash flow and other factors at which similar businesses have been purchased by other acquirers; |
|
the competitive nature of the process by which the Company acquired the business; and |
|
because of the complementary strategic fit and resulting synergies it brings to existing operations. |
(3) |
Cash, Cash Equivalents and Marketable Securities |
Cost |
Unrealized Gains |
Unrealized Losses Less Than 12 Months |
Unrealized Losses 12 Months or Longer |
Estimated Fair Value |
||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Cash |
$ | 47,675 | $ | | $ | | $ | | $ | 47,675 | ||||||||||||
Money market funds |
15,956 | | | | 15,956 | |||||||||||||||||
Total |
$ | 63,631 | $ | | $ | | $ | | $ | 63,631 |
Cost |
Unrealized Gains |
Unrealized Losses Less Than 12 Months |
Unrealized Losses 12 Months or Longer |
Estimated Fair Value |
||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Cash |
$ | 96,779 | $ | | $ | | $ | | $ | 96,779 | ||||||||||||
Money market funds |
43,333 | | | | 43,333 | |||||||||||||||||
Total |
$ | 140,112 | $ | | $ | | $ | | $ | 140,112 |
(4) |
Accounts Receivable, Net |
Years Ended July 31, |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2013 |
2012 |
||||||||||
Advance charges receivable |
$ | 118,584 | $ | 85,237 | |||||||
Trade accounts receivable |
65,660 | 53,163 | |||||||||
Other receivables |
1,153 | 2,420 | |||||||||
185,397 | 140,820 | ||||||||||
Less allowance for doubtful accounts |
(2,683 | ) | (2,920 | ) | |||||||
$ | 182,714 | $ | 137,900 |
Description and Fiscal Year |
Balance at Beginning of Year |
Charged to Costs And Expenses |
Deductions to Bad Debt |
Balance at End of Year |
||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
July 31, 2013 |
$ | 2,920 | $ | 1,424 | $ | (1,661 | ) | $ | 2,683 | |||||||||
July 31, 2012 |
3,122 | 1,626 | (1,828 | ) | 2,920 | |||||||||||||
July 31, 2011 |
2,841 | 478 | (197 | ) | 3,122 |
(5) |
Property and Equipment, Net |
Years Ended July 31, |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2013 |
2012 |
||||||||||
Transportation and other equipment |
$ | 58,016 | $ | 52,066 | |||||||
Office furniture and equipment |
59,936 | 53,363 | |||||||||
Software |
74,261 | 54,399 | |||||||||
Land |
443,126 | 350,463 | |||||||||
Buildings and leasehold improvements |
414,284 | 400,302 | |||||||||
1,049,623 | 910,593 | ||||||||||
Less accumulated depreciation and amortization |
(372,106 | ) | (323,430 | ) | |||||||
$ | 677,517 | $ | 587,163 |
(6) |
Goodwill |
Balance as of July 31, 2011 |
$ | 198,620 | ||||
Goodwill recorded during the period |
1,420 | |||||
Effect of foreign currency translation |
(3,602 | ) | ||||
Balance as of July 31, 2012 |
$ | 196,438 | ||||
Goodwill recorded during the period |
73,414 | |||||
Effect of foreign currency translation |
(2,389 | ) | ||||
Balance as of July 31, 2013 |
$ | 267,463 |
(7) |
Intangibles, Net |
July 31, 2013 |
||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Gross Carrying Amount |
Accumulated Amortization |
Net Book Value |
Weighted Average Remaining Useful Life (in years) |
|||||||||||||||
Amortized intangible assets: |
||||||||||||||||||
Covenants not to compete |
$ | 12,515 | $ | (10,965 | ) | $ | 1,550 | 4 | ||||||||||
Supply contracts |
26,322 | (21,757 | ) | 4,565 | 8 | |||||||||||||
Customer relationships |
7,389 | (395 | ) | 6,994 | 6 | |||||||||||||
Trade name |
2,998 | (402 | ) | 2,596 | 4 | |||||||||||||
Licenses and databases |
3,306 | (1,305 | ) | 2,001 | 3 | |||||||||||||
$ | 52,530 | $ | (34,824 | ) | $ | 17,706 |
July 31, 2012 |
||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Gross Carrying Amount |
Accumulated Amortization |
Net Book Value |
Weighted Average Remaining Useful Life (in years) |
|||||||||||||||
Amortized intangible assets: |
||||||||||||||||||
Covenants not to compete |
$ | 11,087 | $ | (10,685 | ) | $ | 402 | 4 | ||||||||||
Supply contracts |
26,041 | (18,762 | ) | 7,279 | 6 | |||||||||||||
Licenses and databases |
1,316 | (1,012 | ) | 304 | 1 | |||||||||||||
$ | 38,444 | $ | (30,459 | ) | $ | 7,985 |
2014 |
$ | 4,266 | ||||
2015 |
3,958 | |||||
2016 |
3,307 | |||||
2017 |
2,399 | |||||
2018 |
1,769 | |||||
Thereafter |
2,007 | |||||
$ | 17,706 |
(8) |
Accounts Payable and Accrued Liabilities |
Years Ended July 31, |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2013 |
2012 |
||||||||||
Trade accounts payable |
$ | 34,488 | $ | 16,353 | |||||||
Accounts payable to sellers |
36,073 | 36,153 | |||||||||
Accrued insurance |
6,048 | 5,686 | |||||||||
Accrued compensation and benefits |
21,978 | 16,791 | |||||||||
Buyer deposits and prepayments |
25,384 | 18,061 | |||||||||
Other accrued liabilities |
12,677 | 9,633 | |||||||||
$ | 136,648 | $ | 102,677 |
(9) |
Long-Term Debt |
Years Ending July 31, |
Term Loan |
|||||
---|---|---|---|---|---|---|
2014 |
$ | 75,000 | ||||
2015 |
75,000 | |||||
2016 |
218,750 | |||||
$ | 368,750 |
(10) |
Derivatives and Hedging |
(11) |
Stockholders Equity |
Period |
Options Exercised |
Exercise Price |
Shares Net Settled for Exercise |
Shares Withheld for Taxes(1) |
Net Shares to Employee |
Share Price for Withholding |
Tax Withholding (in 000s) |
|||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
FY 2011Q2 |
177,500 | $ | 8.47 | 76,050 | 37,834 | 63,616 | $ | 19.76 | $ | 748 | ||||||||||||||||||||
FY 2011Q3 |
548,334 | $ | 11.02 | 295,496 | 118,032 | 134,806 | $ | 20.40 | $ | 2,408 | ||||||||||||||||||||
FY 2011Q4 |
180,000 | $ | 9.48 | 76,396 | 48,366 | 55,238 | $ | 22.33 | $ | 1,080 | ||||||||||||||||||||
FY 2012Q1 |
40,000 | $ | 9.00 | 16,082 | 8,974 | 14,944 | $ | 22.39 | $ | 201 | ||||||||||||||||||||
FY 2012Q2 |
20,000 | $ | 9.00 | 7,506 | 4,584 | 7,910 | $ | 23.98 | $ | 110 | ||||||||||||||||||||
FY 2012Q3 |
322,520 | $ | 10.74 | 131,299 | 85,683 | 105,538 | $ | 26.38 | $ | 2,260 | ||||||||||||||||||||
FY 2013Q2 |
73,228 | $ | 8.89 | 18,127 | 17,461 | 37,640 | $ | 35.91 | $ | 627 |
(1) |
Shares withheld for taxes are treated as a repurchase of shares for accounting purposes but do not count against the Companys stock repurchase program. |
Years Ended July 31, |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2013 |
2012 |
2011 |
|||||||||||||
General and administrative |
$ | 17,135 | $ | 18,802 | $ | 17,976 | |||||||||
Yard operations |
2,289 | 2,989 | 1,031 | ||||||||||||
Total |
$ | 19,424 | $ | 21,791 | $ | 19,007 |
Number of Shares (in 000s) |
Weighted Average Grant- date Fair Value |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|
Non-vested shares at July 31, 2012 |
6,013 | $ | 6.59 | |||||||
Grants of non-vested shares |
335 | 7.87 |
Number of Shares (in 000s) |
Weighted Average Grant- date Fair Value | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
Vested |
(2,889 | ) | 6.57 | |||||||
Forfeitures or expirations |
(63 | ) | 6.06 | |||||||
Non-vested shares at July 31, 2013 |
3,396 | $ | 6.55 |
Shares (in 000s) |
Weighted Average Exercise Price |
Weighted Average Remaining Contractual Term |
Aggregate Intrinsic Value (in 000s) |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Outstanding at July 31, 2012 |
16,179 | $ | 16.24 | 6.60 | $ | 121,977 | ||||||||||||
Grants of options |
335 | 29.76 | | | ||||||||||||||
Exercises |
(1,529 | ) | 13.78 | | | |||||||||||||
Forfeitures or expirations |
(63 | ) | 24.50 | | | |||||||||||||
Outstanding at July 31, 2013 |
14,922 | $ | 16.75 | 5.91 | $ | 235,086 | ||||||||||||
Exercisable at July 31, 2013 |
11,526 | $ | 16.03 | 5.58 | $ | 190,003 | ||||||||||||
Vested and expected to vest at July 31, 2013 |
14,438 | $ | 16.73 | 5.91 | $ | 227,892 |
Options Outstanding |
Options Exercisable |
||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Range of Exercise Prices |
Number Outstanding at July 31, 2013 (in 000s) |
Weighted Average Remaining Contractual Life |
Weighted Average Exercise Price |
Number Exercisable at July 31, 2013 (in 000s) |
Weighted Average Exercise Price |
||||||||||||||||||
$9.00$14.88 |
774 | 2.90 | $ | 12.30 | 774 | $ | 12.30 | ||||||||||||||||
$15.11$15.11 |
8,000 | 5.70 | $ | 15.11 | 6,800 | $ | 15.11 | ||||||||||||||||
$16.38$20.56 |
5,063 | 6.11 | $ | 18.28 | 3,666 | $ | 17.99 | ||||||||||||||||
$21.05$35.72 |
1,085 | 8.65 | $ | 25.03 | 286 | $ | 22.85 | ||||||||||||||||
14,922 | 5.91 | $ | 16.75 | 11,526 | $ | 16.03 |
(12) |
Income Taxes |
Years Ended July 31, |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2013 |
2012 |
2011 |
|||||||||||||
U.S. |
$ | 236,118 | $ | 237,596 | $ | 234,035 | |||||||||
Non-U.S. |
40,754 | 40,460 | 29,842 | ||||||||||||
Total income before taxes |
$ | 276,872 | $ | 278,056 | $ | 263,877 |
Years Ended July 31, |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2013 |
2012 |
2011 |
|||||||||||||
Federal: |
|||||||||||||||
Current |
$ | 87,484 | $ | 102,152 | $ | 84,119 | |||||||||
Deferred |
(1,073 | ) | (14,557 | ) | 278 | ||||||||||
86,411 | 87,595 | 84,397 | |||||||||||||
State: |
|||||||||||||||
Current |
3,871 | 3,332 | 7,186 | ||||||||||||
Deferred |
66 | (461 | ) | (128 | ) | ||||||||||
3,937 | 2,871 | 7,058 | |||||||||||||
Foreign: |
|||||||||||||||
Current |
9,090 | 8,460 | 5,818 | ||||||||||||
Deferred |
(2,591 | ) | (2,989 | ) | 229 | ||||||||||
6,499 | 5,471 | 6,047 | |||||||||||||
$ | 96,847 | $ | 95,937 | $ | 97,502 |
Years Ended July 31, |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2013 |
2012 |
2011 |
|||||||||||||
Federal statutory rate |
35.0 | % | 35.0 | % | 35.0 | % | |||||||||
State income taxes, net of federal income tax benefit |
1.1 | 1.2 | 1.7 | ||||||||||||
Foreign |
(1.8 | ) | (1.9 | ) | (0.4 | ) | |||||||||
Compensation and fringe benefits |
0.1 | | 0.2 | ||||||||||||
Other differences |
0.6 | 0.2 | 0.4 | ||||||||||||
Effective tax rate |
35.0 | % | 34.5 | % | 36.9 | % |
Years Ended July 31, |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2013 |
2012 |
||||||||||
Deferred tax assets: |
|||||||||||
Allowance for doubtful accounts |
$ | 1,109 | $ | 1,013 | |||||||
Accrued compensation and benefits |
29,909 | 23,902 | |||||||||
State taxes |
438 | 625 | |||||||||
Accrued other |
3,376 | 2,634 | |||||||||
Deferred revenue |
675 | 2,056 |
Years Ended July 31, |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2013 |
2012 | ||||||||||
Property and equipment |
11,651 | 10,969 | |||||||||
Losses carried forward |
4,494 | 1,028 | |||||||||
Federal tax benefit |
7,897 | 7,989 | |||||||||
Total gross deferred tax assets |
59,549 | 50,216 | |||||||||
Less valuation allowance |
(1,597 | ) | (1,211 | ) | |||||||
Net deferred tax assets |
57,952 | 49,005 | |||||||||
Deferred tax liabilities: |
|||||||||||
Vehicle pooling costs |
(6,814 | ) | (4,537 | ) | |||||||
Prepaid insurance |
(1,039 | ) | (792 | ) | |||||||
Deferred revenue |
| | |||||||||
Intangibles and goodwill |
(25,757 | ) | (24,758 | ) | |||||||
Workers compensation |
(81 | ) | (224 | ) | |||||||
Total gross deferred tax liabilities |
(33,691 | ) | (30,311 | ) | |||||||
Net deferred tax asset (liability) |
$ | 24,261 | $ | 18,694 |
Years Ended July 31, |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2013 |
2012 |
||||||||||
North America current liabilities |
$ | 2,216 | $ | 3,601 | |||||||
North America non-current assets |
29,928 | 22,279 | |||||||||
Foreign non-current liabilities |
(7,883 | ) | (7,186 | ) | |||||||
Net deferred tax asset (liability) |
$ | 24,261 | $ | 18,694 |
Years Ended July 31, |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2013 |
2012 |
2011 |
|||||||||||||
Balance as of August 1 |
$ | 16,946 | $ | 18,794 | $ | 18,144 | |||||||||
Increases related to current year tax positions |
1,844 | 2,036 | 1,592 | ||||||||||||
Prior year tax positions: |
|||||||||||||||
Prior year increase |
1,474 | 618 | 519 | ||||||||||||
Prior year decrease |
| (952 | ) | (531 | ) | ||||||||||
Cash settlement |
| (452 | ) | | |||||||||||
Lapse of statute of limitations |
(3,086 | ) | (3,098 | ) | (930 | ) | |||||||||
Balance at July 31 |
$ | 17,178 | $ | 16,946 | $ | 18,794 |
(13) |
Net Income Per Share |
Years Ended July 31, |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2013 |
2012 |
2011 |
|||||||||||||
Weighted average common shares outstanding |
124,912 | 128,120 | 151,298 | ||||||||||||
Effect of dilutive securities-stock options |
4,869 | 3,308 | 2,054 | ||||||||||||
Diluted weighted average common shares outstanding |
129,781 | 131,428 | 153,352 |
(14) |
Segments and Other Geographic Information |
Years Ended July 31, |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2013 |
2012 |
2011 |
|||||||||||||
North America |
$ | 826,030 | $ | 731,495 | $ | 681,274 | |||||||||
United Kingdom |
209,186 | 192,696 | 190,972 | ||||||||||||
Other |
11,170 | | | ||||||||||||
$ | 1,046,386 | $ | 924,191 | $ | 872,246 | ||||||||||
International Total |
$ | 228,945 | $ | 199,322 | $ | 197,504 |
Years Ended July 31, |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2013 |
2012 |
2011 |
|||||||||||||
North America |
$ | 565,590 | $ | 514,527 | $ | 526,137 | |||||||||
United Kingdom |
102,934 | 91,543 | 95,638 | ||||||||||||
Other |
44,219 | | | ||||||||||||
$ | 712,743 | $ | 606,070 | $ | 621,775 | ||||||||||
International Total |
$ | 151,179 | $ | 95,704 | $ | 100,217 |
(15) |
Commitments and Contingencies |
Years Ending July 31, |
Capital Leases |
Operating Leases |
||||||||
---|---|---|---|---|---|---|---|---|---|---|
2014 |
$ | 229 | $ | 23,162 | ||||||
2015 |
62 | 18,493 | ||||||||
2016 |
6 | 15,343 | ||||||||
2017 |
| 13,953 | ||||||||
2018 |
| 12,168 | ||||||||
Thereafter |
| 48,060 | ||||||||
297 | $ | 131,179 | ||||||||
Less amount representing interest |
(8 | ) | ||||||||
$ | 289 |
(16) |
GuaranteesIndemnifications to Officers and Directors |
(17) |
Related Party Transactions |
(18) |
Employee Benefit Plan |
(19) |
Restructuring |
Years Ended July 31, |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2013 |
2012 |
2011 |
|||||||||||||
General and Administrative |
|||||||||||||||
Severance |
$ | 978 | $ | 1,675 | $ | 1,190 | |||||||||
Relocation |
759 | 534 | | ||||||||||||
Total general and administrative |
$ | 1,737 | $ | 2,209 | $ | 1,190 | |||||||||
Yard Operations |
|||||||||||||||
Severance |
$ | | $ | | $ | | |||||||||
Relocation |
189 | 745 | 183 | ||||||||||||
Impairment |
| 1,123 | | ||||||||||||
Total yard operations |
$ | 189 | $ | 1,868 | $ | 183 |
Description and Fiscal Year |
Balance at Beginning of Year |
Expense |
Payments |
Balance at End of Year |
||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
July 31, 2013 |
$ | 1,800 | 978 | 554 | $ | 2,224 | ||||||||||||
July 31, 2012 |
$ | 1,051 | 1,675 | 926 | $ | 1,800 |
(20) |
Quarterly Information (in thousands, except per share data) (Unaudited)(1) |
Fiscal Quarter |
|||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Fiscal Year 2013 |
First |
Second |
Third |
Fourth |
|||||||||||||||
Revenues |
$ | 238,866 | $ | 266,185 | $ | 277,638 | $ | 263,697 | |||||||||||
Operating income |
$ | 74,357 | $ | 62,770 | $ | 82,813 | $ | 63,052 | |||||||||||
Income before income taxes |
$ | 71,588 | $ | 61,117 | $ | 82,005 | $ | 62,162 | |||||||||||
Net income |
$ | 45,845 | $ | 39,640 | $ | 53,236 | $ | 41,304 | |||||||||||
Basic net income per share |
$ | 0.37 | $ | 0.32 | $ | 0.42 | $ | 0.33 | |||||||||||
Diluted net income per share |
$ | 0.36 | $ | 0.31 | $ | 0.41 | $ | 0.32 |
Fiscal Quarter |
|||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Fiscal Year 2012 |
First |
Second |
Third |
Fourth |
|||||||||||||||
Revenues |
$ | 225,626 | $ | 227,904 | $ | 244,105 | $ | 226,556 | |||||||||||
Operating income |
$ | 65,376 | $ | 63,539 | $ | 87,944 | $ | 69,494 | |||||||||||
Income before income taxes |
$ | 63,815 | $ | 62,216 | $ | 84,547 | $ | 67,478 | |||||||||||
Net income |
$ | 41,149 | $ | 40,603 | $ | 55,471 | $ | 44,896 | |||||||||||
Basic net income per share |
$ | 0.32 | $ | 0.32 | $ | 0.44 | $ | 0.36 | |||||||||||
Diluted net income per share |
$ | 0.31 | $ | 0.31 | $ | 0.43 | $ | 0.35 |
(1) |
Earnings per share were computed independently for each of the periods presented; therefore, the sum of the earnings per share amounts for the quarters may not equal the total for the year. |
Incorporated by reference herein |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Exhibit Number |
|
Description |
|
Form |
|
Date |
|||||||||
10.18 |
Executive Officer Employment Agreement between the Registrant and John Lindle, dated June 1, 2013 |
|
Filed herewith |
||||||||||||
21.1 |
List of subsidiaries of Registrant |
|
Filed herewith |
||||||||||||
23.1 |
Consent of Independent Registered Public Accounting Firm |
|
Filed herewith |
||||||||||||
24.1 |
Power of Attorney (included on signature page) |
|
Filed herewith |
||||||||||||
31.1 |
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
Filed herewith |
||||||||||||
31.2 |
Certification of Chief 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 |
|
Filed herewith |
||||||||||||
101.INS |
XBRL Instance Document |
||||||||||||||
101.SCH |
XBRL Taxonomy Extension Schema Document |
||||||||||||||
101.CAL |
XBRL Taxonomy Extension Calculation Linkbase Document |
||||||||||||||
101.DEF |
XBRL Extension Definition |
||||||||||||||
101.LAB |
XBRL Taxonomy Extension Label Linkbase Document |
||||||||||||||
101.PRE |
XBRL Taxonomy Extension Presentation Linkbase Document |
||||||||||||||
(1) |
In
accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release No. 33-8238 and 34-47986, Final Rule: Managements Reports on Internal
Control Over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports, the certifications furnished in Exhibits 32.1 and
32.2 hereto are deemed to accompany this Form 10-K and will not be deemed filed for purposes of Section 18 of the Exchange Act. Such
certifications will not be deemed to be incorporated by reference into any filings under the Securities Act or the Exchange Act, except to the extent
that the registrant specifically incorporates it by reference. |
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EXHIBIT 10.18
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this Agreement) is made and entered into as of June 1, 2013 (the Effective Date), by and between Copart, Inc., a Delaware corporation (the Company), as employer, and John Lindle (Employee), as employee, for the benefit of the Company and its parent, subsidiaries, and affiliates. The Company and Employee are sometimes also referred to herein individually as a Party and together as the Parties.
RECITALS:
A.
Pursuant to that certain Stock Purchase Agreement dated on or about the date hereof (the Purchase Agreement) by and among the Company, QCSA Group, LLC, a Delaware limited liability company (QCSA), and Salvage Parent, Inc., a Delaware corporation (SPI), the Company is purchasing from QCSA all of the issued and outstanding shares of SPIs common stock. Capitalized terms not defined in this Agreement shall have the meaning ascribed to them in the Purchase Agreement.
B.
Immediately prior to the Effective Date, Employee was employed by QCSA Holdings, Inc., a Delaware corporation and a wholly-owned Subsidiary of SPI (Holdings), as the Chief Executive Officer and President of Holdings pursuant to that Employment Agreement dated as of December 18, 2009 (the Prior Agreement).
C.
The Company desires Employee to be employed by the Company after the closing of the transactions contemplated by the Purchase Agreement, which shall be effective as of the Effective Date, and Employee desires to be employed by the Company on and after the Effective Date.
D.
The Parties desire to fully and finally resolve all issues regarding Employees employment by Holdings and to set forth the terms of Employees employment by the Company.
E.
Company would not have entered into the Purchase Agreement but for Employees promises in this Agreement, including but not limited to the protective covenants contained in Section 7 and the release contained in Section 8 of this Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the Parties agree as follows:
1.
Employment. Company agrees to employ Employee in the position of Senior Vice President of Strategic Growth of the Company and Chief Executive Officer of Holdings. Employee will be responsible for performing those duties that are reasonably assigned to Employee by the Board of Directors of the Company or any authorized committee or designee thereof (the Board). Employee will work full time for the Company and for no other employer while employed by the Company. Employee agrees to perform all assigned duties to the best of
Employees ability. Employee will conduct himself at the highest professional standards of ethics and integrity. Employee agrees to devote Employees full business time to the Companys business and to act always in the best interests of the Company. Employee will comply with all applicable laws and all of the Companys rules and policies as adopted from time to time. Employees position, title, job description, duties and responsibilities may be modified from time to time in the sole discretion of the Board.
2.
Term of Agreement. This Agreement shall commence on the Effective Date and will continue until December 31, 2014 (the Term), unless terminated earlier in accordance with terms of Section 5 of this Agreement. The Parties agree that the obligations created in Sections 7, 8 and 9 of this Agreement will survive the termination of this Agreement and the termination of Employees employment with the Company.
3.
Compensation.
(a)
The Company shall pay Employee an annual salary of $210,000 (Base Salary), payable in bi-weekly installments in accordance with the Companys customary practices from time to time in effect.
(b)
The Company shall provide Employee with a car allowance of $9,000 per year, payable $750 per month.
(c)
For each Company fiscal year during the Term, Employee will also be entitled to receive an annual cash bonus (the Bonus) in an amount determined by the Board based upon Employees contributions and performance. Payment of the Bonus shall be a discretionary decision of the Board. The Bonus, if any, will be paid as soon as practical following the determination by the Board that the Bonus has been earned, but in no event after the fifteenth day of the third month of the Companys fiscal year or the calendar year, whichever is later, following the date Employee earns the Bonus and it is no longer subject to a substantial risk of forfeiture.
(d)
All raises, bonuses, stock option grants, and promotions, if any, are based on merit, as determined by the Board in its sole discretion.
(e)
Employee shall be reimbursed (or in appropriate circumstances receive advances for) ordinary and necessary business expenses incurred by Employee in connection with the Companys business.
(f)
All payments made pursuant to this Agreement will be subject to applicable taxes and withholdings in accordance with Company policy.
(g)
If Employees employment is terminated by the Company or Employee, all accrued compensation due to Employee through the date of termination shall be paid on the next regularly scheduled payday following Employees termination or in accordance with applicable law. Employees employment and all further and future compensation to Employee
2
shall immediately cease effective as of the termination date. In addition, upon termination of Employees employment, Employee shall pay the Company any amounts owed by Employee to the Company, and the Company shall be entitled to offset against any amounts owed to Employee any amounts that are lawfully owed by Employee to the Company without prejudice to any other rights or remedies of the Company available at law or in equity.
(h)
Employee agrees that the compensation stated in this Section 3 constitutes the full and exclusive monetary consideration and compensation for all services rendered under this Agreement and for all promises and obligations under this Agreement.
4.
Benefits. Employee shall be entitled to employment benefits such as but not limited to vacation, holidays, leaves of absence, health insurance, dental insurance, etc., if any, available to employees of the Company generally, in accordance with any policies, procedures, or benefit plans adopted by the Company from time to time during the Term. Employees rights and those of Employees dependents under any such benefits policies or plans shall be governed solely by the terms of such policies or plans. The Company reserves to itself, or its designated administrators, exclusive authority and discretion to determine all issues of eligibility, interpretation and administration of each such benefit plan or policy. The Companys employment benefits, and policies related thereto, are subject to termination, modification or limitation at the Companys sole discretion. Upon termination of Employees employment with the Company for any reason, Employees rights under any applicable benefit plans shall be determined under the provisions of those plans.
5.
Termination and Severance.
(a)
If the Company terminates Employees employment during the Term, other than for death, Disability or Cause (each as defined below), or if Employee terminates his employment during the Term for Good Reason (as defined below), then, in lieu of any severance benefits to which Employee may otherwise be entitled under any Company severance plan or program, and subject to the remaining provisions of this Section 5, Employee shall be eligible to receive a lump sum payment equal to six (6) months of Employees Base Salary, less applicable tax withholding (the Severance Payment). In addition, if the Company terminates Employees employment during the first six (6) months of the Term, the Severance Payment Employee is eligible to receive under this Section 5(a) shall be increased by the amount of Base Salary Employee would have earned during the period beginning on the date of termination and ending on the six (6) month anniversary of the Effective Date.
(b)
The Company may terminate Employees employment for Cause immediately by giving written notice to Employee. No compensation or benefits will be paid or provided to Employee under this Agreement on account of a termination for Cause, or for periods following the date when such a termination of employment is effective. As used in this Agreement, Cause shall mean Employees failure to perform his duties hereunder; Employees breach of a material provision of this Agreement (including, without limitation, Section 7) or the agreements incorporated herein by reference; Employees violation of a federal law, state law, or regulation applicable to the business of the Company; misappropriation or embezzlement of Company funds or an act of fraud or dishonesty upon the Company made by Employee;
3
conviction of, or plea of nolo contendre to, a felony; Employees continued failure to comply with directives of the Companys Chief Executive Officer or Board; Employee becoming employed in any capacity by any Competing Business (as defined below); or any conduct of Employee that is contrary to the best interests of and/or adversely affects the reputation of the Company, it officers, directors, or employees.
(c)
The Company may terminate Employees employment for Disability by giving Employee 30 days advance notice in writing. No compensation or benefits will be paid or provided to Employee under this Agreement on account of termination for Disability, or for periods following the date when such a termination of employment is effective. As used in this Agreement, Disability shall mean that Employee, at the time notice is given, has been unable to substantially perform his duties under this Agreement for a period of not less than six (6) consecutive months as the result of his incapacity due to physical or mental illness. In the event that Employee resumes the performance of substantially all of his duties hereunder before the termination of his employment under this Section 5(c) becomes effective, the notice of termination shall automatically be deemed to have been revoked.
(d)
Employee may terminate his employment for Good Reason within 30 days following the expiration of any Company cure period (as described below) if one or more of the events described in clauses (i) and (ii) below shall have occurred without Employees prior written consent:
(i)
the assignment to Employee of any duties or the reduction of Employees duties, either of which results in a material diminution in Employees position or responsibilities with the Company in effect immediately prior to such assignment, or the removal of Employee from such position and responsibilities (other than a promotion or similar move to another position);
(ii)
a material breach by the Company of a material provision of this Agreement.
Employee may not resign for Good Reason unless Employee has provided the Company with written notice of the acts or omissions constituting the grounds for Good Reason within 90 days of the initial existence of such grounds for Good Reason and a reasonable cure period of 30 days following the date of such notice.
(e)
Employees employment shall terminate immediately upon Employees death. The Company shall have no obligation to pay or provide any compensation or benefits under this Agreement on account of Employees death, or for periods following Employees death.
(f)
The receipt of any Severance Payment or other benefits after the termination of Employees employment pursuant to this Agreement is subject to Employee signing and not revoking a severance agreement and release of claims in a form reasonably acceptable to the Company (the Release), which must become effective no later than the 60th day following the termination of Employees employment (the Release Deadline); if the foregoing condition is not met, Employee will forfeit any right to a Severance Payment or other
4
benefits under this Agreement. To become effective, the Release must be executed by Employee and any revocation periods (as required by statute, regulation, or otherwise) must have expired without Employee having revoked the Release. In addition, no severance payments or benefits will be paid or provided until the Release actually becomes effective.
(g)
(i) Notwithstanding anything to the contrary in this Agreement, no severance pay or benefits to be paid or provided to Employee, if any, pursuant to this Agreement that, when considered together with any other severance payments or separation benefits, are considered deferred compensation under Section 409A of the Internal Revenue Code of 1986, as amended (the Code), and the final regulations and any guidance promulgated thereunder (Section 409A) (together, the Deferred Payments) will be paid or otherwise provided until Employee has a separation from service within the meaning of Section 409A. Similarly, no severance payable to Employee, if any, pursuant to this Agreement that otherwise would be exempt from Section 409A pursuant to Treasury Regulation Section 1.409A-1(b)(9) will be payable until Employee has a separation from service within the meaning of Section 409A
(ii)
Any severance payments or benefits under this Agreement that would be considered Deferred Payments will be paid on, or, in the case of installments, will not commence until, the sixtieth (60th) day following Employees separation from service, or, if later, such time as required by Section 5(g)(iii). Except as required by Section 5(g)(iii), any installment payments that would have been made to Employee during the sixty (60) day period immediately following Employees separation from service but for the preceding sentence will be paid to Employee on the sixtieth (60th) day following Employees separation from service and the remaining payments shall be made as provided in this Agreement.
(iii)
Notwithstanding anything to the contrary in this Agreement, if Employee is a specified employee within the meaning of Section 409A (Specified Employee) at the time of Employees termination, then any Deferred Payments, which are otherwise due to Employee on or within the six (6) month period following Employees termination will accrue during such six (6) month period and will become payable in a lump sum payment on the date six (6) months and one (1) day following the date of Employees separation from service or the date of Employees death, if earlier. All Deferred Payments, if any, will be payable in accordance with the payment schedule applicable to each payment or benefit. Each payment and benefit payable under this Agreement is intended to constitute separate payments for purposes of Treasury Regulation Section 1.409A-2(b)(2).
(iv)
Any amount paid under this Agreement that satisfies the requirements of the short-term deferral rule set forth in Treasury Regulation Section 1.409A-1(b)(4) will not constitute Deferred Payments for purposes of Section 5(g)(i).
(v)
Amounts paid under the Agreement that qualifies as a payment made as a result of an involuntary separation from service pursuant to Treasury Regulation Section 1.409A-1(b)(9)(iii) that do not exceed the Section 409A Limit will not constitute Deferred Payments for purposes of Section 5(g)(i). For this purpose, Section 409A Limit means the lesser of two (2) times: (A) Employees annualized compensation based upon the annual rate of pay paid to Employee during Employees taxable year preceding the taxable year of Employees termination of employment as determined under Treasury Regulation 1.409A-1(b)(9)(iii)(A)(1)
5
and any Internal Revenue Service guidance issued with respect thereto; or (B) the maximum amount that may be taken into account under a qualified plan pursuant to Code Section 401(a)(17) for the year in which Employees employment is terminated.
(vi)
The foregoing provisions are intended to comply with the requirements of Section 409A so that none of the severance payments and benefits to be provided hereunder will be subject to additional tax imposed under Section 409A, and any ambiguities herein will be interpreted to so comply. The Company and Employee agree to work together in good faith to consider amendments to this Agreement and to take such reasonable actions which are necessary, appropriate or desirable to avoid imposition of any additional tax or income recognition prior to actual payment to Employee under Section 409A.
6.
Policies and Practices. The Company may, from time to time, establish policies and practices through manuals, policy statements, handbooks, memoranda or other communications. These policies and practices are subject to change and do not constitute contractual rights or obligations.
7.
Protective Covenants. The covenants in this Section 7 shall be referred to as the Protective Covenants and provide as follows:
(a)
As used in this Agreement,
(i) Customer means a person or entity that has had a business relationship with the Company within the last two (2) years of Employees employment with the Company and with whom Employee had personal contact (either with the person or with agents of the entity) in the course of performing his duties for the Company;
(ii) a Competing Business means a person or entity that (A) is in the business of auctioning salvage, used or recovered theft vehicles, or processing or selling damaged, abandoned, repossessed, total loss, or used or recovered theft vehicles, or (B) otherwise provides products or services that would compete with or displace the products or services of the Company;
(iii) any reference in the Protective Covenants to the point in time where Employees employment terminates refers to the end of Employees employment with the Company or any successor to which Employees employment may be transferred or assigned as a result of any reorganization, restructuring, merger or assignment by the Company, regardless of which party ends the relationship or why it is ended; and
(iv) in the event that Employee is found by a court or arbitrator to be in violation of one of the post-employment restrictions provided for in the Protective Covenants, then the period of time applicable to such restriction shall be extended by one day for each day Employee is found to be in violation of such restriction until such time as the restriction is complied with by Employee for a length of time that is equal to, but does not exceed, the length of time originally provided for.
6
(b)
The Company will provide Confidential Information (as defined in the Confidentiality and Intellectual Property Assignment Agreement form attached hereto as Exhibit A) to Employee during the Term. During employment with the Company and thereafter, Employee shall not, without the prior written consent of the Board, disclose or use for any purpose (except in the course of Employees employment under this Agreement and in furtherance of the business of the Company or any of its affiliates or subsidiaries) any confidential information or proprietary data of the Company. As an express condition of Employees employment with the Company, Employee agrees to execute a Confidentiality and Intellectual Property Assignment Agreement in the form attached hereto as Exhibit A and any such additional confidentiality agreements as from time to time requested by the Company.
(c)
During the Term and for eighteen (18) complete calendar months following the date on which Employees employment by the Company terminates for any reason (other than death), Employee will not, either directly or indirectly, (i) solicit, induce, or encourage any employee of the Company to leave the Company, or (ii) help another person or entity to hire away an employee of the Company, unless otherwise expressly authorized in writing to do so by an authorized officer of the Company. Notwithstanding the foregoing, if the Company terminates Employees employment prior to the end of the Term, other than for death, Disability or Cause, or if Employee terminates his employment prior to the end of the Term for Good Reason, then the covenant contained in this Section 7(c) shall terminate upon the 18 month anniversary of the Effective Date.
(d)
During the Term and for eighteen (18) complete calendar months following the date on which Employees employment by the Company terminates for any reason (other than death), Employee will not, directly or indirectly, interfere with the relationship between the Company and a Customer. It shall be considered a prohibited act of interference for Employee to participate in soliciting, encouraging, or inducing a Customer (i) to do business with a Competing Business or (ii) to stop or reduce doing business with the Company, except where such conduct is expressly authorized in writing by an authorized officer of the Company. The Parties stipulate that this restriction is inherently limited to a reasonable geography or geographic substitute because it is limited to the place or location where the Customer is located at the time. Notwithstanding the foregoing, if the Company terminates Employees employment prior to the end of the Term, other than for death, Disability or Cause, or if Employee terminates his employment prior to the end of the Term for Good Reason, then the covenant contained in this Section 7(d) shall terminate upon the 18 month anniversary of the Effective Date.
(e)
During the Term and for eighteen (18) complete calendar months following the date on which Employees employment by the Company terminates for any reason (other than death), Employee will not, directly or indirectly, as an employee, consultant, advisor, contractor, shareholder, director, partner, joint-venturer, or investor, assist in the management, administration, or sales activities of, or otherwise engage in, any Competing Business in any geographic area in which the Employee performed services for the Company and/or was responsible for managing the Companys business (the Protected Area). The foregoing shall not be construed to prohibit passive investments such as mutual funds or ownership of less than 1% of a publicly-held companys outstanding stock. The Parties stipulate that the geographic limitation used in this restriction is reasonable given Employees high level duties for
7
the Company, the geographic scope of the Companys business, and Employees in-depth knowledge of the Companys confidential information and trade secrets. Notwithstanding the foregoing, if the Company terminates Employees employment prior to the end of the Term, other than for death, Disability or Cause, or if Employee terminates his employment prior to the end of the Term for Good Reason, then the covenant contained in this Section 7(e) shall terminate upon the 18 month anniversary of the Effective Date.
(f)
Without limitation, the Parties agree and intend that the covenants contained in this Section 7 shall be deemed to be a series of separate covenants and agreements, one for each and every county, state, city, or other political subdivision of the Protected Area. The Parties intend these covenants to be enforceable to the fullest extent of the law as to scope, time and geography, and to be interpreted as broadly as reasonably necessary to protect the business interests of the Company without unreasonably restricting Employees rights. If, in any judicial proceeding, a court refuses to enforce any of such separate covenants (or any part thereof), then the Parties agree that such unenforceable covenant (or such part) shall be eliminated from this Agreement to the extent necessary to permit the remaining separate covenants (or portions thereof) to be enforced. In the event that the provisions of this Section 7 are deemed by a court or arbitrator to exceed the time, geographic or scope limitations permitted by applicable law, then the Parties agree that such provisions shall be reformed by the court or arbitrator for purposes of the relief then requested (be it temporary or permanent), and for purposes of the jurisdiction covered by such court or arbitrator only, so that the restriction shall be enforceable to the maximum time, geographic or scope limitations, as the case may be, permitted by applicable law within that jurisdiction covered by the court or arbitrator.
(g)
Employee acknowledges and agrees that the covenants set forth in this Section 7 are (i) reasonable and necessary for the protection of legitimate business interests of the Company, (ii) not against the public interest, (iii) do not place a unreasonable burden upon Employees ability to earn a living, and (iv) relate to matters which are of a special, unique, and extraordinary character that gives each of such covenants a special, unique, and extraordinary value. Employee further acknowledges and agrees that a breach of any of such covenants will result in irreparable harm and damages to the Company which cannot be adequately compensated by a monetary award. Accordingly, the Parties expressly agree that, in addition to all other remedies available at law or in equity, the Company shall be entitled to the immediate remedy of a temporary restraining order, preliminary injunction, or such other form of injunctive or equitable relief as may be used by any court of competent jurisdiction to restrain or enjoin Employee from breaching any such covenant or provision or to specifically enforce the provisions of this Agreement.
8.
General Release. Employee, on behalf of himself, his heirs, and legal representatives, does hereby release, discharge and covenant not to sue or file any charges or claims against Holdings and/or any of Holdings related or affiliated entities or successors (including, but not limited to the Company), or any of their current or former officers, directors, managers, employees or representatives (collectively, the Released Parties) under any common or statutory local, state, or federal law, for any type of claim, demand or action whatsoever arising out of or connected with his employment by Holdings and/or the Prior Agreement. Employee agrees not to make any claims or demands against the Released Parties for claims
8
arising due to his employment prior to the Effective Date, such as, but not limited to, wrongful discharge; unlawful employment discrimination on the basis of sex or any other form of unlawful employment discrimination; retaliation; breach of contract; breach of the duty of good faith and fair dealing; violation of public policy; intentional or negligent infliction of emotional distress; promissory estoppel; defamation of character; duress; intentional misrepresentation or fraud; invasion of privacy; negligent hiring, retention, or supervision; any alleged act of harassment or intimidation; or any other intentional or negligent act of personal injury.
Employee represents that he has not filed any complaints, charges or lawsuits against the Released Parties with any governmental agency or any court and that he will not do so at any time hereafter; provided, however, this Agreement shall not limit Employee from filing a lawsuit for the sole purpose of enforcing his rights under this Agreement.
Employee further promises not to initiate a lawsuit or to bring any other claim against any of the Released Parties arising out of or in any way related to his employment by Holdings, the termination of his employment with Holdings, and/or the termination of the Prior Agreement.
Employee agrees that he has been fully compensated for all services he performed for Holdings and/or any of the Released Parties prior to the Effective Date. Employee agrees that as of the Effective Date he is not entitled to any payments or benefits from the Released Parties under the Prior Agreement or otherwise, including but not limited to payments of Base Salary and/or bonus compensation.
9.
WAIVER OF JURY TRIAL. NO PARTY TO THIS AGREEMENT OR ANY ASSIGNEE, SUCCESSOR, HEIR OR PERSONAL REPRESENTATIVE OF A PARTY SHALL SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM OR ANY OTHER LITIGATION PROCEDURE BASED UPON OR ARISING OUT OF THIS AGREEMENT, EMPLOYEES EMPLOYMENT RELATIONSHIP WITH THE COMPANY, OR ANY OF THE OTHER AGREEMENTS BETWEEN THE PARTIES. NO PARTY WILL SEEK TO CONSOLIDATE ANY SUCH ACTION, IN WHICH A JURY TRIAL HAS BEEN WAIVED, WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT OR HAS NOT BEEN WAIVED. THE PROVISIONS OF THIS SECTION HAVE BEEN FULLY DISCUSSED BY THE PARTIES HERETO, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NEITHER PARTY HAS IN ANY WAY AGREED WITH OR REPRESENTED TO THE OTHER PARTY THAT THE PROVISIONS OF THIS SECTION WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
10.
Choice of Law and Venue. The Parties agree that this Agreement shall be construed under the laws of the State of Texas. The Parties expressly consent to the personal and exclusive jurisdiction and venue of the state and federal courts located in Dallas County, Texas, for any lawsuit arising out of relating to this Agreement or Employees employment relationship with the Company.
11.
Representations and Warranties of Employee. Employee hereby represents, warrants and covenants that, on and as of the Effective Date, Employee is not a party or subject to any non-competition or non-solicitation agreement or any other restrictive covenants, other
9
than arrangements between Employee and the Company and other than arrangements disclosed in writing to the Company (Prior Covenants), which could give rise to any liability to any previous employer of Employee relating to or arising out of the Companys recruitment or employment of, or other dealings, with Employee. Further, Employee shall not engage in any conduct during the Term which could give rise to any claim that such conduct violates any Prior Covenants.
12.
Severability. In the event that any provision, covenant, section, subsection, paragraph, or any portion thereof, of this Agreement is held by any court or other tribunal to be illegal, invalid or unenforceable, either in whole or in part, the legality, validity or enforceability of the remaining provisions, covenants, sections, subsections, paragraphs, or portions thereof shall not be affected thereby, and each such provision, covenant, section, subsection, paragraph, or any portion thereof shall remain valid and enforceable to the fullest extent permitted by law.
13.
Notices. All notices, requests, demands and other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed given (i) on the date of delivery, or, if earlier, (ii) one (1) day after being sent by a nationally recognized commercial overnight service, or (iii) three (3) days after being mailed by registered or certified mail, return receipt requested, prepaid and addressed to the Parties or their successors at the following addresses, or at such other addresses as the Parties may later designate in writing:
If to Employee:
John Lindle
___________________
___________________
If to the Company:
Copart, Inc.
Attn: Paul Styer
Senior Vice President & General Counsel
14185 Dallas Parkway, Suite 300
Dallas, TX 75254
or to such other address or the attention of such other person as the recipient Party has previously furnished to the other Party in writing in accordance with this Section 13. Employee will notify any prospective new employer of the Protective Covenants in this Agreement prior to accepting employment with such new employer. Both parties shall have the right to express their opinion to a third party about the enforceability and/or applicability of the Protective Covenants in this Agreement and appropriate remedies that may apply to Employee or those acting in concert with Employee, and no such communication with such a third party shall give rise to cause of action for tortious interference or otherwise.
14.
Miscellaneous.
(a)
Employee may not assign or delegate this Agreement or Employees obligations hereunder to any third party. This Agreement shall automatically inure to the benefit
10
of the Company, and its parent, subsidiaries, affiliates, successors and assigns, and shall be enforceable by any one or more of same that has a legitimate business interest in such enforcement without the need for any further approval or action by Employee or the Company. In this regard, the Purchasers are expressly understood to be beneficiaries of this Agreement with a legitimate business interest in enforcing this Agreement and the right to enforce it. Employee expressly agrees that the Company may assign its rights and duties under this Agreement to any third party, including, without limitation, assignment in connection with any sale of some or all of Companys assets or affiliated companies, or the merger by the Company, its parent company, or any affiliated entity, with or into any business entity, and that any such assignee shall have the right to enforce this Agreement to the full extent reasonable and necessary to protect a legitimate business interest of the assignee.
(b)
A waiver of any breach of this Agreement shall not be a waiver of any subsequent breach, nor modify this Agreement; provided, however, that if Employee believes that the Company has not complied with a provision of this Agreement then Employee will promptly notify the Company and if Employee fails to do so or elects to continue in the employment of the Company for more than ten (10) business days after the alleged breach then Employee will have waived the right to assert breach of the provision at issue as a defense to enforcement of this Agreement. This Agreement may be amended or modified by, and only by, a written instrument executed by both the Company and Employee. No waiver of any term or provision of this Agreement shall be effective unless in writing and signed by the Party against whom such waiver is sought to be enforced.
(c)
The Company shall pay Employee $100 within seven (7) business days of Employees execution of this Agreement.
(d)
This Agreement, together with the Confidentiality and Intellectual Property Assignment Agreement between Employee and the Company of even date herewith, embody the entire agreement and understanding between the Parties concerning the matters covered herein and therein and supersede all prior agreements and understandings, whether oral or written, relating to the subject matter hereof and thereof, including but not limited to the Prior Agreement. Employee agrees that no verbal or other statement, inducement or representation relied upon by Employee for the execution of this Agreement has been made to Employee which is not contained in this Agreement.
(e)
This Agreement has been negotiated by the Parties, each having had the opportunity to be represented by counsel of its choice, and no provision hereof shall be construed against either Party by reason of that Party being considered to be the drafter of such provision. Employee represents that Employee has read this Agreement carefully and understands this Agreement or has relied exclusively on Employees counsel for an understanding of the terms and conditions herein.
(f)
As a condition to Employees employment, Employee may be required to sign additional documents, acknowledgements, and authorizations. Employees acceptance of employment pursuant to the terms of this Agreement shall be contingent upon Employees signing and delivering such documents, acknowledgements, and authorizations as the Company
11
in its sole discretion deems to be appropriate. Without limiting the generality of the foregoing, Employees successful completion of a drug and background check with satisfactory results is a condition precedent to the Companys obligations under this Agreement.
(g)
The headings of the paragraphs contained in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of any provision of this Agreement.
(h)
This Agreement may be executed in one or more counterparts, none of which need contain the signature of more than one Party hereto, and each of which shall be deemed to be an original, and all of which together shall constitute a single agreement.
(i)
Nothing in this Agreement shall be construed to eliminate or diminish any common law or statutory obligation that Employee may have to the Company, such as, but not limited to, fiduciary duties of loyalty and confidentiality, trade secret protection, and the obligation to provide the Company with notice of corporate opportunities under the corporate opportunities doctrine.
* * * * * * * * * *
[Remainder of Page Intentionally Left Blank Signature Page Follows]
12
IN WITNESS WHEREOF, the Parties have executed this Agreement effective as of the Effective Date.
EMPLOYEE:
/s/ John Lindle
____________________________________
John Lindle
COMPANY:
COPART, INC.
By: /s/ Paul A. Styer
________________________________
Paul A. Styer, Secretary
________________________________
13
EXHIBIT A
Form of Confidentiality and Intellectual Property Assignment Agreement
[attached]
COPART CONFIDENTIALITY AND
INTELLECTUAL PROPERTY ASSIGNMENT AGREEMENT
1.
Confidential Information and Trade Secrets
a.
You agree that all non-public information communicated to you with respect to the business of Copart, Inc. and its subsidiaries, including but not limited to QCSA Holdings, Inc. (collectively referred to herein as Copart), including without limitation Coparts business management information system and any other confidential or trade secret information (collectively Confidential Information) gained by you by reason of association or employment with Copart, whether or not that Confidential Information was directly, indirectly or unintentionally communicated, shall be treated by you as confidential and shall not be disclosed to anyone without Coparts express authorization. Confidential Information includes, but is not limited to, all data, systems, compilations, programs, devices, strategies, concepts, ideas or methods, regardless of whether kept in a document, electronic storage medium, or in the programmers memory, and any and all information concerning or related to:
(i)
Coparts financial condition, results of operations, and amounts of compensation paid to officers and employees;
(ii)
marketing and sales programs of Copart and the terms and conditions (including prices) of sales and offers of sales for products and/or services by Copart along with information regarding Coparts proposed products or designs, whether or not pursued by Copart;
(iii)
the terms, conditions and current status of Coparts agreements and relationships with any customers, suppliers or other entities;
(iv)
the identities and business preferences of Coparts actual and prospective customers and/or suppliers or any employee or agent of Coparts actual and prospective customers and/or suppliers with whom Copart communicates along with Coparts practices and procedures for identifying prospective customers;
(v)
the names and identities of any and all of Coparts customers, including any and all customer lists or similar compilations;
(vi)
the manufacturing processes and techniques, regulatory approval strategies, computer programs, data, formulae, and compositions, service techniques and protocols, new product designs and other skills, ideas, and strategic plans possessed, developed, accumulated or acquired by Copart;
(vii)
personnel information including the productivity and profitability (or lack thereof) of Coparts employees, agents, or independent contractors;
(viii)
any communications between Copart, its officers, directors, shareholders or employees, and/or any attorney retained by Copart for any purpose, or any person retained or employed by such attorney for the purpose of assisting such attorney in his or her representation of Copart;
(ix)
the cost or overhead associated with the goods and services provided by Copart along with Coparts pricing structure for its goods or services, including its margins, discounts, volume purchases, rebates, mark-ups and/or incentives; and
1
(x)
any other matter or thing, whether or not recorded on any medium or kept in your memory, (A) by which Copart derives actual or potential economic value from such matter or thing being not generally known to other persons or entities who might obtain economic value from its disclosure or use, or (B) which gives Copart an opportunity to obtain an advantage over its competitors who do not know or use the same.
b.
You promise and agree that, both during and after your association with Copart, you shall not use or disclose any Confidential Information to any other person, unless specifically authorized in writing by an officer of Copart to do so. If an officer of Copart gives you written authorization to make any such disclosures or to use such information, you shall do so only within the limits and to the extent of that authorization. If a time limit is required in order to make this restriction enforceable, then the restrictions on use or disclosure of Confidential Information will only apply for three (3) years after the end of your association where information that does not qualify as a trade secret is concerned (the restrictions will apply to trade secret information for as long as the information remains qualified as a trade secret).
c.
You acknowledge and agree that the unauthorized use of or disclosure of any Confidential Information constitutes unfair competition for which Copart has no adequate remedy at law thereby making injunctive relief appropriate.
d.
You agree that during your association with Copart, you will not improperly use, disclose, or induce Copart to use any proprietary information or trade secrets of any third party which you have an obligation to keep in confidence. You further agree that you will not bring onto Coparts premises or transfer onto Coparts technology systems any unpublished document, proprietary information, or trade secrets belonging to any such third party unless disclosure to, and use by, Copart has been consented to in writing by such third party.
e.
You acknowledge that Copart has received and will in the future receive confidential or proprietary information belonging to third parties (Third Party Confidential Information) subject to a duty on Coparts part to maintain the confidentiality of such information and to use it only for certain limited purposes. You hereby agree to hold all such Third Party Confidential Information in the strictest confidence and not to disclose it to any person, firm or corporation or to use it except as necessary in carrying out your work for Copart consistent with Coparts agreement with such third party. You further agree to comply with any and all Copart policies and guidelines that may be adopted from time to time regarding Third Party Confidential Information.
2.
Intellectual Property Assignment
a.
As between Copart and you, you agree that all right, title, and interest in and to any and all Copart Inventions and Intellectual Property, as defined herein, are the sole property of Copart. Copart Inventions and Intellectual Property or CIIP refers to all inventions, works of authorship, copyright eligible works (such as materials, records, notes, drawings, and software), ideas, designs, developments, improvements, discoveries, and other intellectual property you develop, discover, or create (i) that relate to Coparts business, or to any actual or demonstrably anticipated research, future work, or projects of Copart, whether or not conceived or developed alone or with others, and whether or not conceived or developed during regular working hours, or (ii) that result from any work you performed for Copart, performed on Copart time, or performed using Coparts property, resources, or Confidential Information. You hereby assign to Copart, without further consideration, your entire right, title, and interest (throughout the United States and in all foreign countries) free and clear of all liens and encumbrances in and to all such CIIP, which shall be the sole property of Copart, whether or not patentable. You also agree to promptly make full written disclosure to Copart of any CIIP.
2
b.
You hereby acknowledge and agree that all writings, ideas, information, and other works which may be copyrighted (including software and computer programs) which are related to the present or planned, or reasonably anticipated business of Copart and are prepared by you (solely or jointly with others) during your relationship with Copart shall be, to the extent permitted by law, deemed to be works for hire or the result of works for hire, as defined by U.S. copyright laws, with the copyright automatically vesting in Copart. To the extent that such writings and works are not works for hire, you hereby waive any and all rights in such writings and works and hereby assign to Copart all of your present and future rights, title and interest, including copyright, in such writings and works.
c.
Any assignment to Copart of CIIP includes all rights of attribution, paternity, integrity, modification, disclosure and withdrawal, and any other rights throughout the world that may be known as or referred to as moral rights, artists rights, droit moral, or the like (collectively, Moral Rights). To the extent that Moral Rights cannot be assigned under applicable law, you hereby waive and agree not to enforce any and all Moral Rights, including, without limitation, any limitation on subsequent modification, to the extent permitted under applicable law.
You agree to keep and maintain adequate, current, accurate, and authentic written records of all CIIP made by you (solely or jointly with others) during the term of your association with Copart. The records will be in the form of notes, sketches, drawings, electronic files, reports, or any other format that may be specified by Copart. As between Copart and you, the records are and will be available to and remain the sole property of Copart at all times.
e.
You further agree to reasonably cooperate with Copart, both during and after association with Copart, in obtaining and enforcing patents, copyrights, trademarks, and other protections of Coparts rights in and to all CIIP. Without limiting the generality of the foregoing, you shall, at any time during or after association with Copart, at Coparts request, execute all papers, render all assistance, and perform all lawful acts which Copart considers necessary or advisable for the preparation, filing, prosecution, issuance, procurement, maintenance or enforcement of patents, trademarks, copyrights and other protections, and any applications for any of the foregoing, of the United States or any foreign country for any CIIP and for the transfer of any interest you may have therein. You shall execute any and all papers and documents required to vest title in Copart or its nominee in any CIIP. If Copart is unable because of your mental or physical incapacity or for any reason to secure your signature to apply for or pursue any application for any United States or foreign patent, copyright or other registration covering CIIP, then you hereby irrevocably designate and appoint Copart and its duly authorized officers and agents as your agent and attorney in fact, to act for and on your behalf to do all lawfully permitted acts to further the prosecution and issuance of such registrations with the same legal force and effect as if executed by you.
f.
To the extent that you have any previously-created inventions that you wish to exclude from the scope of this Agreement (Prior Inventions), please notify Copart of all such inventions in writing prior to executing this Agreement. You agree not to incorporate any Prior Invention or any invention, improvement, development, concept, discovery or other proprietary information owned by any third party into any Copart product, process or service without Coparts prior written permission.
3.
Conflicting Obligations
You hereby represent and warrant that you have no other agreements, relationships, or commitments to any other person or entity that conflict with the provisions of this Agreement, your obligations to Copart under this Agreement, or your ability to perform the services for which you are being retained by Copart. You further agree that if you have signed a confidentiality agreement or similar type of agreement with any former employer or other entity, you will comply with the terms of any such agreement to the extent that its terms are lawful under applicable law. You represent and warrant that
3
after undertaking a careful search (including searches of your computers, cell phones, electronic devices, and documents), you have returned all property and confidential information belonging to all prior employers (and/or other third parties you have performed services for in accordance with the terms of your applicable agreement).
4.
Return of Copart Materials
Following the end of your association with Copart or at any time upon demand from Copart, you will immediately deliver to Copart, and will not keep in your possession, recreate, or deliver to anyone else, any and all Copart property, including, but not limited to, Confidential Information, Third Party Confidential Information, all devices and equipment belonging to Copart (including computers, handheld electronic devices, telephone equipment, and other electronic devices), all tangible embodiments of the CIIP, all electronically stored information and passwords to access such property, Copart credit cards, records, data, notes, notebooks, reports, files, proposals, lists, correspondence, specifications, drawings, blueprints, sketches, materials, photographs, charts, any other documents and property, and reproductions of any of the foregoing items, including, without limitation, those records maintained pursuant to Section 2(e). You also hereby consent to an exit interview (at Coparts election) to confirm your compliance with this Section 4.
5.
Miscellaneous
a.
The laws of the State of Texas (without regard to Texass conflict of law rules), as well as any and all applicable federal law, including U.S. copyright laws, shall apply to this Agreement. You hereby expressly consent to the personal and exclusive jurisdiction and venue of the state and federal courts located in Dallas County, Texas, for any lawsuit arising out of this Agreement.
b.
This Agreement will be binding upon your heirs, executors, assigns, administrators, and other legal representatives, and will be for the benefit of Copart, its successors, and its assigns. There are no intended third-party beneficiaries to this Agreement, except as may be expressly otherwise stated. Notwithstanding anything to the contrary herein, Copart may assign this Agreement and its rights and obligations under this Agreement to any successor to all or substantially all of Coparts relevant assets, whether by merger, consolidation, reorganization, reincorporation, sale of assets or stock, or otherwise, without the need for further consent by you.
c.
This Agreement, together with Exhibit A, sets forth the entire agreement and understanding between the Copart and you with respect to the subject matters contained herein and supersedes all prior written and oral agreements, discussions, or representations between us regarding these subject matters.
d.
If a court or other body of competent jurisdiction finds, or the parties mutually believe, any provision of this Agreement, or portion thereof, to be invalid or unenforceable, such provision will be enforced to the maximum extent permissible so as to effect the intent of the parties, and the remainder of this Agreement will continue in full force and effect.
e.
No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, will be effective unless in a writing signed by the President or CEO of Copart and you. Waiver by Copart of a breach of any provision of this Agreement will not operate as a waiver of any other or subsequent breach.
f.
The rights and obligations of the parties to this Agreement will survive termination of your association with Copart.
4
Acknowledged and agreed:
/s/ John Lindle | 5-28-13 |
____________________________________ | ___________________ |
Signature | Date |
|
|
|
|
John Lindle |
|
_________________________________ |
|
Name (printed) |
|
5
EXHIBIT 21.1
COPART, INC. SUBSIDIARIES
ACE AUTO PARTS, INC.
State of incorporation Oregon
COPART CREDIT ACCEPTANCE CORP
State of incorporation California
COPART-DALLAS, INC.
State of incorporation California
Doing business as Copart Salvage Auto Auctions
Copart Auto Auctions
COPART-HOUSTON, INC.
State of incorporation California
Doing business as Copart Salvage Auto Auctions
Copart Auto Auctions
COPART INVESTMENT HOLDINGS, LLC
Limited Liability Company Delaware
COPART LAND HOLDING, LLC
Limited Liability Company Maryland
CPRT LAND HOLDINGS, INC.
State of incorporation California
COPART LAND HOLDINGS, LLC
Limited Liability Company Connecticut
COPART OF ARIZONA, INC.
State of incorporation Arizona
Doing business as Copart Salvage Auto Auctions
Copart Auto Auctions
COPART OF ARKANSAS, INC.
State of incorporation Arkansas
Doing business as Copart Salvage Auto Auctions
Copart Auto Auctions
COPART OF CONNECTICUT, INC.
State of incorporation Connecticut
Doing business as Copart Salvage Auto Auctions
Copart Auto Auctions
COPART OF FLORIDA, INC.
State of incorporation Florida
COPART OF HOUSTON, INC.
General Partner Texas
Doing business as Copart Salvage Auto Auctions
Copart Auto Auctions
COPART OF KANSAS, INC.
State of incorporation Kansas
Doing business as Copart Salvage Auto Auctions
Copart Auto Auctions
COPART OF LOUISIANA, INC.
State of incorporation Louisiana
Doing business as Copart Salvage Auto Auctions
Copart Auto Auctions
COPART OF MISSOURI, INC.
State of incorporation Missouri
Doing business as Copart Salvage Auto Auctions
Copart Auto Auctions
COPART OF OKLAHOMA, INC.
State of incorporation Oklahoma
Doing business as Copart Salvage Auto Auctions
Copart Auto Auctions
COPART OF TENNESSEE, INC.
State of incorporation Tennessee
Doing business as Copart Salvage Auto Auctions
Copart Auto Auctions
COPART OF TEXAS, INC.
General Partner Texas
Doing business as Copart Salvage Auto Auctions
Copart Auto Auctions
COPART OF WASHINGTON, INC.
State of incorporation Washington
Doing business as Copart Salvage Auto Auctions
Copart Auto Auctions
DALLAS COPART SALVAGE AUTO AUCTIONS LIMITED PARTNERSHIP
Limited Partnership Texas
Doing business as Copart Salvage Auto Auctions
Copart Auto Auctions
GULF STORAGE, INC.
State of incorporation Louisiana
HOUSTON COPART SALVAGE AUTO AUCTIONS LIMITED PARTNERSHIP
Limited partnership Texas
Doing business as Copart Salvage Auto Auctions
Copart Auto Auctions
L&S TOWING AND STORAGE, LLC
Limited Liability Company Florida
MOTORS AUCTION GROUP, INC.
State of incorporation Delaware
Doing business as Copart Salvage Auto Auctions
Copart Auto Auctions
TDP WEST PALM, INC.
State of incorporation Florida
Doing business as Copart Salvage Auto Auctions
Copart Auto Auctions
VB2, INC.
State of incorporation Delaware
Doing business as VB2
OUTBID.COM
COPART CLAIMS HANDLING SERVICES LIMITED
CPRT HOLDINGS LLC
Delaware
COPART LTD
Dormant
SALVAGE PARENT, INC.
Delaware
QCSA HOLDINGS INC.
QCSA CHARITY LLC
Delaware
DESERT VIEW AUTO REPO, INC
California
CALIFORNIA TOWING & STORAGE LLC
California
QCSA MADISON LLC
Illinois
QCSA MINNESOTA LLC
Minnesota
QCSA OF HAMMOND LLC
Indiana
CRASHED TOYS, LLC
Iowa
SALVAGE DIRECT, INC
Pennsylvania
QUAD CITY SALVAGE AUCTIN, INC.
Iowa
QCSA EQUIPMENT INC.
Iowa
QCSA/SPRINGFIELD INC.
Illinois
QCSA ELGIN, INC
Illinois
STORAGE DIRECT LLC
PENNSYLVANIA
QCSA OF INDIANA, LLC
Indiana
SALVAGE WHOLESALE AUCTION NETWORK LLC
Iowa
GUARDIAN VEHICLES, LLC
CWH SERVICES, LLC
CPRT (EUROPE) LIMITED
United Kingdom
TRPC LIMITED
TRAPOC LIMITED
Doing business as Copart UK
U-PULL-IT LIMITED
COPART EUROPE LIMITED
United Kingdom
UNIVERSAL SALVAGE AUCTIONS LIMITED
Dormant
COPART UK LIMITED.
Doing business as Copart UK
UNIVERSAL SALVAGE LIMITED
Dormant
JOHN HEWITT & SONS (GARAGES) LIMITED
CENTURY SALVAGE SALES LIMITED
Dormant
D HALES LIMITED
COPART GCC GMBH
CORNVILLE LIMITED
Dormant
CPRT HOLDING CO. NETHERLANDS BV
Netherlands
COPART VEHICLE AUCTIONS IRELAND LIMITED
Ireland
AUTORESIDUOUS S.L.
Spain
WOM GERMANY
Germany
COPART UAE AUCTIONS LLC
United Arab Emirates
COPART CANADA INC.
Doing business as Copart Auto Auctions
COPART DO BRASIL ORGANIZACAO DO LEILOES LTDA
Brazil
1. |
I have reviewed this Annual Report on Form 10-K of Copart, Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) |
Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) |
Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. |
The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: September 30, 2013 | ||||||
/s/ A. JAYSON ADAIR A. Jayson Adair Chief Executive Officer |
1. |
I have reviewed this Annual Report on Form 10-K of Copart, Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) |
Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) |
Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. |
The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: September 30, 2013 |
||||||
/s/ WILLIAM E. FRANKLIN William E. Franklin Senior Vice President of Finance and Chief Financial Officer |
/s/ A. JAYSON ADAIR A. Jayson Adair Chief Executive Officer |
/s/ WILLIAM E. FRANKLIN William E. Franklin Senior Vice President of Finance and Chief Financial Officer |
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Segments and Other Geographic Information (Details) (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 12 Months Ended | |||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 31, 2013
|
Apr. 30, 2013
|
Jan. 31, 2013
|
Oct. 31, 2012
|
Jul. 31, 2012
|
Jul. 01, 2012
|
Apr. 30, 2012
|
Jan. 31, 2012
|
Oct. 31, 2011
|
Jul. 31, 2013
|
Jul. 31, 2012
|
Jul. 31, 2011
|
||||||||||||
Segment Reporting Information, Profit (Loss) [Abstract] | |||||||||||||||||||||||
Revenues | $ 263,697 | [1] | $ 277,638 | [1] | $ 266,185 | [1] | $ 238,866 | [1] | $ 226,556 | [1] | $ 226,556 | [1] | $ 244,105 | [1] | $ 227,904 | [1] | $ 225,626 | [1] | $ 1,046,386 | $ 924,191 | $ 872,246 | ||
Other
|
|||||||||||||||||||||||
Segment Reporting Information, Profit (Loss) [Abstract] | |||||||||||||||||||||||
Revenues | 11,170 | ||||||||||||||||||||||
International Total
|
|||||||||||||||||||||||
Segment Reporting Information, Profit (Loss) [Abstract] | |||||||||||||||||||||||
Revenues | 228,945 | 199,322 | 197,504 | ||||||||||||||||||||
Operating segments | North America
|
|||||||||||||||||||||||
Segment Reporting Information, Profit (Loss) [Abstract] | |||||||||||||||||||||||
Revenues | 826,030 | 731,495 | 681,274 | ||||||||||||||||||||
Operating segments | United Kingdom
|
|||||||||||||||||||||||
Segment Reporting Information, Profit (Loss) [Abstract] | |||||||||||||||||||||||
Revenues | $ 209,186 | $ 192,696 | $ 190,972 | ||||||||||||||||||||
|
Stockholder's Equity (Details Textuals 4) (USD $)
In Millions, unless otherwise specified |
12 Months Ended | ||
---|---|---|---|
Jul. 31, 2013
|
Jul. 31, 2012
|
Jul. 31, 2011
|
|
Equity [Abstract] | |||
The aggregate intrinsic value of options exercised | $ 25.4 | $ 16.6 | $ 16.2 |
Unrecongnised total compensation cost related to non-vested stock-based awards | 20.4 | ||
Amortized cost on a straight-line basis over a weighted average term | 1 year 9 months 29 days | ||
Fair value of options vested | $ 22.9 | $ 20.9 | $ 19.6 |
Income Taxes (Details 1) (USD $)
In Thousands, unless otherwise specified |
12 Months Ended | ||
---|---|---|---|
Jul. 31, 2013
|
Jul. 31, 2012
|
Jul. 31, 2011
|
|
Federal: | |||
Current | $ 87,484 | $ 102,152 | $ 84,119 |
Deferred | (1,073) | (14,557) | 278 |
Federal Income Tax Expense (Benefit), Continuing Operations | 86,411 | 87,595 | 84,397 |
State: | |||
Current | 3,871 | 3,332 | 7,186 |
Deferred | 66 | (461) | (128) |
State and Local Income Tax Expense (Benefit), Continuing Operations | 3,937 | 2,871 | 7,058 |
Foreign: | |||
Current | 9,090 | 8,460 | 5,818 |
Deferred | (2,591) | (2,989) | 229 |
Foreign Income Tax Expense (Benefit), Continuing Operations | 6,499 | 5,471 | 6,047 |
Income tax expense (benefit), total | $ 96,847 | $ 95,937 | $ 97,502 |
Employee Benefit Plan (Details Textuals) (USD $)
In Millions, unless otherwise specified |
12 Months Ended | ||
---|---|---|---|
Jul. 31, 2013
|
Jul. 31, 2012
|
Jul. 31, 2011
|
|
United States Defined Contribution Plan
|
|||
Defined Contribution Plans [Line Items] | |||
Recognized deferred compensation expenses | $ 0.5 | $ 0.5 | $ 0.4 |
Defined contribution plan, contributions by employer, percentage | 20.00% | ||
Maximum employer contribution on employees salary deferral | 15.00% | ||
United Kingdom Based Defined Contribution Plans
|
|||
Defined Contribution Plans [Line Items] | |||
Recognized deferred compensation expenses | $ 0.2 | $ 0.2 | $ 0.2 |
Defined contribution plan, contributions by employer, percentage | 5.00% |
Long-Term Debt
|
12 Months Ended | ||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jul. 31, 2013
|
|||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||
Long-Term Debt |
On December 14, 2010, the Company entered into an Amended and Restated Credit Facility Agreement (Credit Facility), which supersedes the Company’s previously disclosed credit agreement with Bank of America, N.A. (Bank of America). The Credit Facility is an unsecured credit agreement providing for (i) a $100.0 million revolving credit facility, including a $100.0 million alternative currency borrowing sublimit and a $50.0 million letter of credit sublimit (Revolving Credit) and (ii) a term loan facility of $400.0 million (Term Loan). On January 14, 2011 the full $400.0 million provided under the Term Loan was borrowed. On September 29, 2011, the Company amended the credit agreement increasing the amount of the term loan facility from $400.0 million to $500.0 million. On March 1, 2013, the Company amended the credit agreement to increase the net leverage ratio at which restrictive spending covenants are introduced from 1:1 to 1.5:1.
The Term Loan, which at July 31, 2013 had $368.8 million outstanding, amortizes $18.8 million each quarter beginning December 31, 2011 with all outstanding borrowings due on December 14, 2015. All amounts borrowed under the Term Loan may be prepaid without premium or penalty. During the twelve months ended July 31, 2013, the Company made principal repayments of $75.0 million. The Company has $1.2 million deferred financing costs in other assets as of July 31, 2013.
Amounts borrowed under the Credit Facility bear interest, subject to certain restrictions, at a fluctuating rate based on (i) the Eurocurrency Rate; (ii) the Federal Funds Rate; or (iii) the Prime Rate as described in the Credit Facility. The Company has entered into two interest rate swaps (see Note 10. Derivatives and Hedging) to exchange its variable interest rate payments commitment for fixed interest rate payments on the Term Loan balance, which at July 31, 2013, totaled $368.8 million. A default interest rate applies on all obligations during an event of default under the credit facility, at a rate per annum equal to 2.0% above the otherwise applicable interest rate. At July 31, 2013, the Company’s interest rate is the 0.20% Eurocurrency Rate plus the 1.5% Applicable Rate. The Applicable Rate can fluctuate between 1.5% and 2.0% depending on the Company’s consolidated net leverage ratio (as defined in the Credit Facility). The Credit Facility is guaranteed by the Company’s material domestic subsidiaries. The carrying amount of the Credit Facility is comprised of borrowing under which the interest accrued under a fluctuating interest rate structure. Accordingly, the carrying value approximates fair value at July 31, 2013 and is classified within level II of the fair value hierarchy.
Amounts borrowed under the Revolving Credit may be repaid and reborrowed until the maturity date, which is December 14, 2015. The Credit Facility requires the Company to pay a commitment fee on the unused portion of the Revolving Credit. The commitment fee ranges from 0.075% to 0.125% per annum depending on the Company’s leverage ratio. The Company had no outstanding borrowings under the Revolving Credit at the end of the period.
The Credit Facility contains customary representations and warranties and may place certain business operating restrictions on us relating to, among other things, indebtedness, liens and other encumbrances, investments, mergers and acquisitions, asset sales, dividends and distributions and redemptions of capital stock. In addition, the Credit Facility provides for the following financial covenants: (i) earnings before income tax, depreciation and amortization (EBITDA); (ii) leverage ratio; (iii) interest coverage ratio; and (iv) limitations on capital expenditures. The Credit Facility contains events of default that include, among others, non-payment of principal, interest or fees, violation of covenants, inaccuracy of representations and warranties, cross-defaults to certain other indebtedness, bankruptcy and insolvency defaults, material judgments, invalidity of the loan documents and events constituting a change of control. The Company is in compliance with all covenants as of July 31, 2013.
The Company’s Term Loan requires quarterly payments of $18.8 million, and the Term Loan matures and all outstanding borrowings are due on December 14, 2015. At July 31, 2013, future annual payments are as follows (in thousands):
|
Cash, Cash Equivalents and Marketable Securities (Details) (USD $)
In Thousands, unless otherwise specified |
Jul. 31, 2013
|
Jul. 31, 2012
|
---|---|---|
Cash and Cash Equivalents and Marketable Securities [Line Items] | ||
Cost | $ 63,631 | $ 140,112 |
Unrealized Gains | ||
Unrealized Losses Less Than 12 Months | ||
Unrealized Losses 12 Months or Longer | ||
Estimated Fair Value | 63,631 | 140,112 |
Cash
|
||
Cash and Cash Equivalents and Marketable Securities [Line Items] | ||
Cost | 47,675 | 96,779 |
Unrealized Gains | ||
Unrealized Losses Less Than 12 Months | ||
Unrealized Losses 12 Months or Longer | ||
Estimated Fair Value | 47,675 | 96,779 |
Money Market Funds
|
||
Cash and Cash Equivalents and Marketable Securities [Line Items] | ||
Cost | 15,956 | 43,333 |
Unrealized Gains | ||
Unrealized Losses Less Than 12 Months | ||
Unrealized Losses 12 Months or Longer | ||
Estimated Fair Value | $ 15,956 | $ 43,333 |
Acquisitions
|
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 31, 2013
|
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions |
Fiscal 2013 Transactions
During the year ended July 31, 2013, the Company acquired 100% of the voting stock of Salvage Parent, Inc., which conducts business primarily as Quad City Salvage Auction, Crashed Toys, and Desert View Auto Auctions. Combined, these businesses operate at 39 locations in 14 states. The Company also acquired salvage vehicle auction business’ in Brazil and U.A.E.; two auction platforms in Germany and Spain; as well as the assets of Gainesville Salvage Disposal and Auto Salvage Auction, Inc., salvage vehicle auction companies with locations in Gainesville, GA, and Davison and Ionia, MI, for a total purchase price of $87.9 million.
These acquisitions were undertaken because of their strategic fit and have been accounted for using the purchase method in accordance with ASC 805, Business Combinations, which has resulted in the recognition of goodwill in the Company’s consolidated financial statements. This goodwill arises because the purchase price reflects a number of factors including their future earnings and cash flow potential; the multiple to earnings, cash flow and other factors at which similar businesses have been purchased by other acquirers, the competitive nature of the process by which the Company acquired the businesses; and because of the complementary strategic fit and resulting synergies brought to existing operations. The goodwill arising from these acquisitions is within Level III of the fair value hierarchy as it is valued using unobservable inputs primarily from third party valuation specialists. Goodwill is not amortized for financial reporting purposes, but may be amortized for tax purposes. Intangible assets acquired include covenants not to compete, supply contracts, customer relationships, trade names, licenses and databases and software with a useful life ranging from 3 to 8 years. The purchase price allocation for Salvage Parent, Inc, and the acquired auction platform in Spain are not final for property and equipment, income taxes and intangible assets acquired pending the final valuation by the Company’s valuation specialists and liability exposure. The Company believes the potential changes to its preliminary purchase price allocation will not have a material impact on the Company’s consolidated financial position and results of operations.
The following table summarizes the preliminary purchase price allocation based on the estimated fair values of the assets acquired and liabilities assumed (in thousands) for these acquisitions:
The acquisitions do not result in a significant change in the Company’s consolidated results of operations individually nor in the aggregate; 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 dates. The acquisition-related expenses incurred during the year ended July 31, 2013 were not significant and are included in general and administrative expenses in the Company’s consolidated financial position and results of operations.
Fiscal 2012 Transactions
The Company had no significant acquisitions during the year ended July 31, 2012.
Fiscal 2011 Transactions
In March 2011, the Company completed the cash acquisition of John Hewitt and Sons, Limited (Hewitt) in the United Kingdom through a stock purchase and the acquisition of Barodge Auto Pool (Barodge) in the U.S. through an asset purchase. The consideration paid for these acquisitions consisted of $34.9 million in cash, net of cash acquired. The acquired assets consisted principally of accounts receivables, inventories, property and equipment, goodwill, accounts payable, deferred tax liabilities, taxes payable and covenants not
to compete. The acquisitions were accounted for using the purchase method of accounting, and the operating results subsequent to the acquisition dates are included in the Company’s consolidated statements of income. These acquisitions were undertaken because of their strategic fit and have been accounted for using the purchase method in accordance with ASC 805, Business Combinations (ASC 805), which has resulted in the recognition of $19.3 million of goodwill in the Company’s consolidated financial statements. This goodwill arises because the purchase price for Hewitt and Barodge reflects a number of factors including:
In accordance with ASC 805, the assets acquired and liabilities assumed have been recorded at their estimated fair values.
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Guarantees- Indemnifications to Officers and Directors
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12 Months Ended | |||
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Jul. 31, 2013
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Guarantees [Abstract] | ||||
Guarantees-Indemnifications to Officers and Directors |
The Company has entered into an updated form of indemnification agreement, which was approved in January 2012. The indemnification agreement to our directors and certain of our officers is to indemnify them to the extent permitted by law against any and all liabilities, costs, expenses, amounts paid in settlement and damages incurred by the directors as a result of any lawsuit, or any judicial, administrative or investigative proceeding in which the directors are sued as a result of their service as members of its Board of Directors. The form was intended to update the current form for our reincorporation into Delaware and general developments in corporate law since the adoption of our original form of indemnification agreement and was done as part of our ordinary course of corporate governance matters. |
Stockholders' Equity (Details) (USD $)
In Thousands, except Share data, unless otherwise specified |
3 Months Ended | |||||||||||||||
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Jan. 31, 2013
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Apr. 30, 2012
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Jan. 31, 2012
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Oct. 31, 2011
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Jul. 31, 2011
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Apr. 30, 2011
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Jan. 31, 2011
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Share-Based Compensation Arrangement By Share-Based Payment Award, Options Exercisable [Abstract] | ||||||||||||||||
Options Exercised | 73,228 | 322,520 | 20,000 | 40,000 | 180,000 | 548,334 | 177,500 | |||||||||
Exercise Price | $ 8.89 | $ 10.74 | $ 9.00 | $ 9.00 | $ 9.48 | $ 11.02 | $ 8.47 | |||||||||
Shares Net Settled for Exercise | 18,127 | 131,299 | 7,506 | 16,082 | 76,396 | 295,496 | 76,050 | |||||||||
Shares Withheld for Taxes (1) | 17,461 | [1] | 85,683 | [1] | 4,584 | [1] | 8,974 | [1] | 48,366 | [1] | 118,032 | [1] | 37,834 | [1] | ||
Net Shares to Employee | 37,640 | 105,538 | 7,910 | 14,944 | 55,238 | 134,806 | 63,616 | |||||||||
Share Price for Withholding | $ 35.91 | $ 26.38 | $ 23.98 | $ 22.39 | $ 22.33 | $ 20.40 | $ 19.76 | |||||||||
Tax Withholding (in 000's) | $ 627 | $ 2,260 | $ 110 | $ 201 | $ 1,080 | $ 2,408 | $ 748 | |||||||||
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Property and Equipment, Net (Details) (USD $)
In Thousands, unless otherwise specified |
Jul. 31, 2013
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Jul. 31, 2012
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Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, gross | $ 1,049,623 | $ 910,593 |
Less accumulated depreciation and amortization | (372,106) | (323,430) |
Property, plant and equipment, net, total | 677,517 | 587,163 |
Transportation and other equipment
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Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, gross | 58,016 | 52,066 |
Office furniture and equipment
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Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, gross | 59,936 | 53,363 |
Software
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Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, gross | 74,261 | 54,399 |
Land
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Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, gross | 443,126 | 350,463 |
Buildings and leasehold improvements
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Property, Plant and Equipment [Line Items] | ||
Property, plant and equipment, gross | $ 414,284 | $ 400,302 |
Derivatives and Hedging
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12 Months Ended | |||
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Jul. 31, 2013
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||
Derivatives and Hedging |
The Company has entered into two interest rate swaps to exchange its variable interest rate payments commitment for fixed interest rate payments on the Term Loan balance which, at July 31, 2013 totaled $368.8 million. The first swap fixed the Company’s interest rate at 85 basis points plus the one month LIBOR rate on the first $287.5 million of its term debt. The second swap fixed the Company’s interest rate at 69 basis points plus the one month LIBOR rate on the next $81.3 million of its term debt.
The swap is a designated effective cash flow hedge under ASC 815, Derivatives and Hedging, and is recorded in other liabilities at its fair value, which at July 31, 2013 is $2.7 million. Each quarter, the Company measures hedge effectiveness using the “hypothetical derivative method” and records in earnings any hedge ineffectiveness with the effective portion of the hedge’s change in fair value recorded in other comprehensive income or loss. The Company has reclassified $2.5 million and $2.1 million for the year ended July 31, 2013 and 2012, respectively, out of other comprehensive income into interest expense.
The notional amount of the swap amortizes until all outstanding borrowings are due on the Term Loan on December 14, 2015 (see Note 9. Long-Term Debt). At July 31, 2013, the notional amount of the interest rate swaps was equal to the Term Loan balance, $368.8 million. The notional amount of the two derivative transactions amortizes $18.8 million per quarter through September 30, 2015 and $200.0 million on December 14, 2015.
The hedge provided by the swap could prove to be ineffective for a number of reasons, including early retirement of the Term Loan, as allowed under the Credit Facility, or in the event the counterparty to the interest rate swap is determined in the future to not be creditworthy. The Company has no plans for early retirement of the Term Loan.
The interest rate swaps are classified within Level II of the fair value hierarchy as the derivatives are valued using observable inputs. The Company determines fair value of the derivative utilizing observable market data of swap rates and basis rates. These inputs are placed into a pricing model using a discounted cash flow methodology in order to calculate the mark-to-market value of the interest rate swap. As of July 31, 2013 and 2012, the Company’s fair value of the interest rate swaps, a Level II financial instrument, were $2.7 million and $4.9 million, respectively, and are classified as other liabilities in the accompanying consolidated balance sheet. |
Segments and Other Geographic Information (Details 1) (USD $)
In Thousands, unless otherwise specified |
Jul. 31, 2013
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Jul. 31, 2012
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Jul. 31, 2011
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Segment Reporting Information, Profit (Loss) [Abstract] | |||
Long-lived assets | $ 712,743 | $ 606,070 | $ 621,775 |
Other
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Segment Reporting Information, Profit (Loss) [Abstract] | |||
Long-lived assets | 44,219 | ||
International Total
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Segment Reporting Information, Profit (Loss) [Abstract] | |||
Long-lived assets | 151,179 | 95,704 | 100,217 |
Operating segments | North America
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Segment Reporting Information, Profit (Loss) [Abstract] | |||
Long-lived assets | 565,590 | 514,527 | 526,137 |
Operating segments | United Kingdom
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Segment Reporting Information, Profit (Loss) [Abstract] | |||
Long-lived assets | $ 102,934 | $ 91,543 | $ 95,638 |
Summary of Significant Accounting Policies (Details Textuals) (USD $)
In Millions, unless otherwise specified |
12 Months Ended | ||
---|---|---|---|
Jul. 31, 2013
Segment
Derivative
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Jul. 31, 2012
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Jul. 31, 2011
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Accounting Policies [Abstract] | |||
Number of interest rate derivatives held | 2 | ||
Number of operating segments | 2 | ||
Number of reportable segment | 1 | ||
Advertising expenses | $ 5.0 | $ 6.5 | $ 8.8 |
Income Taxes (Details 3) (USD $)
In Thousands, unless otherwise specified |
Jul. 31, 2013
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Jul. 31, 2012
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Deferred tax assets: | ||
Allowance for doubtful accounts | $ 1,109 | $ 1,013 |
Accrued compensation and benefits | 29,909 | 23,902 |
State taxes | 438 | 625 |
Accrued other | 3,376 | 2,634 |
Deferred revenue | 675 | 2,056 |
Property and equipment | 11,651 | 10,969 |
Losses carried forward | 4,494 | 1,028 |
Federal tax benefit | 7,897 | 7,989 |
Total gross deferred tax assets | 59,549 | 50,216 |
Less valuation allowance | (1,597) | (1,211) |
Net deferred tax assets | 57,952 | 49,005 |
Deferred tax liabilities: | ||
Vehicle pooling costs | (6,814) | (4,537) |
Prepaid insurance | (1,039) | (792) |
Deferred revenue | ||
Intangibles and goodwill | (25,757) | (24,758) |
Workers compensation | (81) | (224) |
Total gross deferred tax liabilities | (33,691) | (30,311) |
Net deferred tax asset (liability) | $ 24,261 | $ 18,694 |
Property and Equipment, Net (Details Textuals) (USD $)
In Millions, unless otherwise specified |
12 Months Ended | ||
---|---|---|---|
Jul. 31, 2013
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Jul. 31, 2012
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Jul. 31, 2011
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Property, Plant and Equipment [Line Items] | |||
Depreciation expense | $ 42.0 | $ 34.8 | $ 40.2 |
Software
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Property, Plant and Equipment [Line Items] | |||
Amortization expense | $ 9.5 | $ 8.9 | $ 0.8 |
Long-Term Debt (Tables)
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12 Months Ended | |||||||||||||||||||||||||||||||||||
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Jul. 31, 2013
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||
Schedule of future annual payments |
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Restructuring
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Jul. 31, 2013
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring |
The Company relocated its corporate headquarters to Dallas, Texas in fiscal 2012. The restructuring-related costs are as follows (in thousands):
The movements in the severance accrual are as follows (in thousands):
The Company started transitioning its data center to a third party managed data center during the year ended July 31, 2013. The Company reviewed the useful life of certain assets related to its data centers and determined they should be revised from an average of 60 months to an average of 45 months to reflect the shorter useful lives of these assets. Additionally, facility depreciation related to the Company’s IT operations, currently located in the Company’s offices in Fairfield, CA, was accelerated as the department is relocating to the Dallas, TX corporate headquarters. These changes in estimate are accounted for on a prospective basis, resulting in increased depreciation expense over the revised useful lives. These changes will result in $2.9 million in accelerated depreciation expense to be recorded in fiscal 2014. This change resulted in $7.0 million in additional depreciation for the year ended July 31, 2013. |
Employee Benefit Plan
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12 Months Ended | |||
---|---|---|---|---|
Jul. 31, 2013
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Compensation and Retirement Disclosure [Abstract] | ||||
Employee Benefit Plan |
The Company sponsors a 401(k) defined contribution plan covering its eligible employees. The plan is available to all U.S. employees who meet minimum age and service requirements and provides employees with tax deferred salary deductions and alternative investment options. The Company matches 20% of employee contributions up to 15% of employee salary deferral. The Company recognized an expense of $0.5 million, $0.5 million and $0.4 million for the fiscal years ended July 31, 2013, 2012 and 2011, respectively, related to this plan.
The Company also sponsors an additional defined contribution plan for most of its U.K. employees, which is available to all U.K. employees who meet minimum service requirements. The Company matches up to 5% of employee contributions. The Company recognized an expense of $0.2 million, $0.2 million, and $0.2 million for the fiscal years ended July 31, 2013, 2012 and 2011, respectively, related to this plan. |
Summary of Significant Accounting Policies (Details) (USD $)
In Thousands, unless otherwise specified |
12 Months Ended | ||
---|---|---|---|
Jul. 31, 2013
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Jul. 31, 2012
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Jul. 31, 2011
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Cumulative Translation Adjustment Summary [Roll Forward] | |||
Cumulative loss on foreign currency translation, Begining balance | $ (34,933) | $ (23,225) | |
Loss on foreign currency translation | (10,487) | (11,708) | 9,516 |
Cumulative loss on foreign currency translation, Ending balance | $ (45,420) | $ (34,933) | $ (23,225) |
Property and Equipment, Net (Tables)
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12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 31, 2013
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Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of property and equipment |
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Income Taxes (Tables)
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Jul. 31, 2013
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Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of income from continuing operations before taxes |
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Schedule of income tax expense (benefit) from continuing operations |
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Schedule of reconciliation of Income tax |
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Schedule of tax effects on deferred tax assets and deferred tax liabilities |
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Schedule of net deferred tax liability |
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Schedule of unrecognized tax benefits |
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Summary of Significant Accounting Policies (Details Textuals 1)
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12 Months Ended | ||
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Jul. 31, 2013
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Jul. 31, 2012
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Jul. 31, 2011
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Revenues
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Revenue, Major Customer [Line Items] | |||
Concentration risk, benchmark description | more than 10 | more than 10 | more than 10 |
Concentration risk, customer | no single customer accounted for more than 10 | no single customer accounted for more than 10 | no single customer accounted for more than 10 |
Accounts receivables
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Revenue, Major Customer [Line Items] | |||
Concentration risk, benchmark description | more than 10 | more than 10 | |
Concentration risk, customer | one customer accounted for more than 10% | no single customer accounted for more than 10% |
Acquisitions (Tables)
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12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 31, 2013
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Business Combinations [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of preliminary purchase price allocation based on the estimated fair values of the assets acquired and liabilities assumed |
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Long-Term Debt (Details) (USD $)
In Thousands, unless otherwise specified |
Jul. 31, 2013
|
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Debt Disclosure [Abstract] | |
2014 | $ 75,000 |
2015 | 75,000 |
2016 | 218,750 |
Long-term debt | $ 368,750 |
Stockholder's Equity (Details Textuals) (USD $)
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Jul. 31, 2013
|
Jul. 31, 2012
|
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Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Common stock, reserved for issuance of stock options | 16,606,389 | 18,170,575 |
Stockholders' Equity, Number of Shares, Par Value and Other Disclosures [Abstract] | ||
Common stock, shares authorized | 180,000,000 | 180,000,000 |
Common stock par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares outstanding | 125,494,995 | 124,393,700 |
Common stock, shares issued | 125,494,995 | 124,393,700 |
Preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Preferred stock par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Preferred stock, shares outstanding | ||
Preferred stock, shares issued | ||
Employee Stock Purchase Plan (ESPP)
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Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Common stock, reserved for issuance of stock options | 1,240,888 | 1,325,651 |
Accounts Payable and Accrued Liabilities (Details) (USD $)
In Thousands, unless otherwise specified |
Jul. 31, 2013
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Jul. 31, 2012
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Payables and Accruals [Abstract] | ||
Trade accounts payable | $ 34,488 | $ 16,353 |
Accounts payable to sellers | 36,073 | 36,153 |
Accrued insurance | 6,048 | 5,686 |
Accrued compensation and benefits | 21,978 | 16,791 |
Buyer deposits and prepayments | 25,384 | 18,061 |
Other accrued liabilities | 12,677 | 9,633 |
Accounts payable and accrued liabilities, current, total | $ 136,648 | $ 102,677 |
Commitments and Contingencies (Tables)
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12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 31, 2013
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of future minimum lease commitments under noncancelable capital and operating leases |
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Stockholder's Equity (Details 2) (Stock Options, USD $)
In Thousands, except Per Share data, unless otherwise specified |
12 Months Ended | ||
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Jul. 31, 2013
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Jul. 31, 2012
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Jul. 31, 2011
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Stock Options
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Number Of Shares [Roll Forward] | |||
Non-vested shares at July 31, 2012 | 6,013 | ||
Grants of non-vested shares | 335 | ||
Vested | (2,889) | ||
Forfeitures or expirations (in shares) | (63) | ||
Non-vested shares at July 31, 2013 | 3,396 | 6,013 | |
Weighted Average Grant Date Fair Value [Roll Forward] | |||
Non-vested shares at July 31, 2012 | $ 6.59 | ||
Grants of non-vested shares | $ 7.87 | $ 6.01 | $ 6.59 |
Vested | $ 6.57 | ||
Forfeitures or expirations | $ 6.06 | ||
Non-vested shares at July 31, 2013 | $ 6.55 | $ 6.59 |
Restructuring (Details) (USD $)
In Thousands, unless otherwise specified |
12 Months Ended | ||
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Jul. 31, 2013
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Jul. 31, 2012
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Jul. 31, 2011
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General and administrative expense
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Restructuring Cost and Reserve [Line Items] | |||
Restructuring-related costs | $ 1,737 | $ 2,209 | $ 1,190 |
Yard operations expense
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Restructuring Cost and Reserve [Line Items] | |||
Restructuring-related costs | 189 | 1,868 | 183 |
Severance
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Restructuring Cost and Reserve [Line Items] | |||
Restructuring-related costs | 978 | 1,675 | |
Severance | General and administrative expense
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Restructuring Cost and Reserve [Line Items] | |||
Restructuring-related costs | 978 | 1,675 | 1,190 |
Severance | Yard operations expense
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Restructuring Cost and Reserve [Line Items] | |||
Restructuring-related costs | |||
Employee Relocation | General and administrative expense
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Restructuring Cost and Reserve [Line Items] | |||
Restructuring-related costs | 759 | 534 | |
Employee Relocation | Yard operations expense
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Restructuring Cost and Reserve [Line Items] | |||
Restructuring-related costs | $ 189 | $ 745 | $ 183 |
Restructuring (Details 1) (Severance, USD $)
In Thousands, unless otherwise specified |
12 Months Ended | |
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Jul. 31, 2013
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Jul. 31, 2012
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Severance
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Restructuring Reserve [Roll Forward] | ||
Beginning Balance | $ 1,800 | $ 1,051 |
Expense | 978 | 1,675 |
Payments | 554 | 926 |
Ending Balance | $ 2,224 | $ 1,800 |
Quarterly Information (Unaudited) (Details) (USD $)
In Thousands, except Per Share data, unless otherwise specified |
3 Months Ended | 12 Months Ended | |||||||||||||||||||||
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Jul. 31, 2013
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Apr. 30, 2013
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Jan. 31, 2013
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Oct. 31, 2012
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Jul. 31, 2012
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Jul. 01, 2012
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Apr. 30, 2012
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Jan. 31, 2012
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Oct. 31, 2011
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Jul. 31, 2013
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Jul. 31, 2012
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Jul. 31, 2011
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Quarterly Financial Information Disclosure [Abstract] | |||||||||||||||||||||||
Revenues | $ 263,697 | [1] | $ 277,638 | [1] | $ 266,185 | [1] | $ 238,866 | [1] | $ 226,556 | [1] | $ 226,556 | [1] | $ 244,105 | [1] | $ 227,904 | [1] | $ 225,626 | [1] | $ 1,046,386 | $ 924,191 | $ 872,246 | ||
Operating income | 63,052 | [1] | 82,813 | [1] | 62,770 | [1] | 74,357 | [1] | 69,494 | [1] | 87,944 | [1] | 63,539 | [1] | 65,376 | [1] | 282,992 | 286,353 | 265,290 | ||||
Total income before taxes | 62,162 | [1] | 82,005 | [1] | 61,117 | [1] | 71,588 | [1] | 67,478 | [1] | 84,547 | [1] | 62,216 | [1] | 63,815 | [1] | 276,872 | 278,056 | 263,877 | ||||
Net income | $ 41,304 | [1] | $ 53,236 | [1] | $ 39,640 | [1] | $ 45,845 | [1] | $ 44,896 | [1] | $ 55,471 | [1] | $ 40,603 | [1] | $ 41,149 | [1] | $ 180,025 | $ 182,119 | $ 166,375 | ||||
Basic net income per share (in dollars per share) | $ 0.33 | [1] | $ 0.42 | [1] | $ 0.32 | [1] | $ 0.37 | [1] | $ 0.36 | [1] | $ 0.44 | [1] | $ 0.32 | [1] | $ 0.32 | [1] | $ 1.44 | $ 1.42 | $ 1.10 | ||||
Diluted net income per share(in dollars per share) | $ 0.32 | [1] | $ 0.41 | [1] | $ 0.31 | [1] | $ 0.36 | [1] | $ 0.35 | [1] | $ 0.43 | [1] | $ 0.31 | [1] | $ 0.31 | [1] | $ 1.39 | $ 1.39 | $ 1.08 | ||||
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Related Party Transactions
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12 Months Ended | |||
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Jul. 31, 2013
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Related Party Transactions [Abstract] | ||||
Related Party Transactions |
The Company leases certain of its facilities from officers and/or directors of the Company under various lease agreements. Rental payments under these leases totaled $0.4 million, $0 million and $0.05 million for the years ended July 31, 2013, 2012 and 2011, respectively.
During the year ended July 31, 2011, the Company purchased three houses from executives who relocated to the corporate headquarters in Dallas, Texas. During the year ended July 31, 2012, the Company purchased three houses from executives who relocated to the corporate headquarters in Dallas, Texas. During the year ended July 31, 2013, the Company purchased one commercial property from an executive who relocated to the corporate headquarters in Dallas, Texas. As of July 31, 2013, one commercial property remained unsold and is reported in assets held for sale.
During the year ended July 31, 2011, the Company purchased 10,620 shares of stock from the Willis Johnson Foundation for $0.5 million. In addition, the Company loaned $0.2 million to the Copart Private Foundation.
On June 28, 2012, the Company entered into an agreement with Willis J. Johnson, the Company’s Chairman of the Board and a member of the Board of Directors, pursuant to which the Company acquired 2.8 million shares of its common stock at a price of $23.22 per share, or an aggregate purchase price of $65.0 million. The settlement date for the acquisition of the common stock was on or about June 28, 2012, and the purchase was made pursuant to the Company’s existing stock repurchase program. The per share purchase price for the common stock to be acquired was based on the closing price of the Company’s common stock on June 28, 2012 (as reported by The NASDAQ Stock Market). The repurchase was approved by the independent members of the Board of Directors and the Audit Committee of the Board of Directors.
On September 27, 2012, the Company entered into an agreement with Thomas W. Smith, the Company’s former member of the Board of Directors, pursuant to which the Company acquired 0.5 million shares of its common stock at a price of $27.77 per share, or an aggregate purchase price of $13.9 million. The settlement date for the acquisition of the common stock was on or about September 27, 2012, and the purchase was made pursuant to the Company’s existing stock repurchase program. The per share purchase price for the common stock to be acquired was based on the closing price of the Company’s common stock on September 27, 2012 (as reported by The NASDAQ Stock Market). The repurchase was approved by the independent members of the Board of Directors and the Audit Committee of the Board of Directors.
There were no amounts due to or from related parties at July 31, 2013 and 2012. |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Parentheticals) (USD $)
In Thousands, unless otherwise specified |
12 Months Ended | ||
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Jul. 31, 2013
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Jul. 31, 2012
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Jul. 31, 2011
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Statement Of Other Comprehensive Income [Abstract] | |||
Tax effects on unrealized gain (loss) on interest rate swaps | $ (1,647) | $ 1,045 | $ 0 |
Tax effects on reclassification adjustment of interest rate swaps to net income | $ 874 | $ 717 | $ 0 |
Cash, Cash Equivalents and Marketable Securities
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Jul. 31, 2013
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Cash and Cash Equivalents [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash, Cash Equivalents and Marketable Securities |
As of July 31, 2013, cash and cash equivalents include the following (in thousands):
As of July 31, 2012, cash and cash equivalents include the following (in thousands):
The Company invests its excess cash in money market funds and U.S. Treasury Bills. The Company’s cash and cash equivalents are placed with high credit quality financial institutions.
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Summary of Significant Accounting Policies
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12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jul. 31, 2013
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies |
Basis of Presentation and Description of Business
Copart, Inc. was incorporated under the laws of the State of California in 1982. In January 2012, the Company changed the state in which it is incorporated (the “Reincorporation”), and is now incorporated under the laws of the State of Delaware. All references to “we,” “us,” “our,” or “the Company” herein refer to the California corporation prior to the date of the Reincorporation, and to the Delaware corporation on and after the date of the Reincorporation.
The consolidated financial statements of the Company include the accounts of the parent company and its wholly owned subsidiaries, including its foreign wholly owned subsidiaries. Significant intercompany transactions and balances have been eliminated in consolidation.
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 Second Generation (VB2) Internet auction-style sales technology. Sellers are primarily insurance companies but also include banks and financial institutions, charities, car dealerships, fleet operators, and vehicle rental companies. The Company sells principally to licensed vehicle dismantlers, rebuilders, repair licensees, used vehicle dealers and exporters; however at certain locations, the Company sells 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. In the United States and Canada (North America), the United Arab Emirates (U.A.E.) and Brazil, the Company sells vehicles primarily as an agent and derives revenue primarily from fees paid by vehicle sellers and vehicle buyers as well as related fees for services such as towing and storage. In the United Kingdom (U.K.), the Company operates both on a principal basis, purchasing the salvage vehicle outright from the insurance company and reselling the vehicle for its own account, and as an agent. In Germany and Spain, the Company derives revenue from sales listing fees for listing vehicles on behalf of insurance companies.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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 are used for, but not limited to, vehicle pooling costs, self-insured reserves, allowance for doubtful accounts, income taxes, revenue recognition, stock-based compensation, purchase price allocations, long-lived asset and goodwill impairment calculations and contingencies. Actual results could differ from those estimates.
Revenue Recognition
The Company provides a portfolio of services to its sellers and buyers that facilitate the sale and delivery of a vehicle from seller to buyer. These services include the ability to use the Company’s Internet sales technology and vehicle delivery, loading, title processing, preparation and storage. The Company evaluates multiple-element arrangements relative to its member and seller agreements.
The services provided to the seller of a vehicle involve disposing of a vehicle on the seller’s behalf and, under most of the Company’s current North American contracts, collecting the proceeds from the member. The Company applies Accounting Standard Update 2009-13, Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements (ASU 2009-13) for revenue recognition. Pre-sale services, including towing, title processing, preparation and storage, as well as sale fees and other enhancement services meet the
criteria for separate units of accounting. The revenue associated with each service is recognized upon completion of the respective service, net of applicable rebates or allowances. For certain sellers who are charged a proportionate fee based on high bid of the vehicle, the revenue associated with the pre-sale services is recognized upon completion of the sale when the total arrangement is fixed and determinable. The estimated selling price of each service is determined based on management’s best estimate and allotted based on the relative selling price method. Vehicle sales, where vehicles are purchased and remarketed on the Company’s own behalf, are recognized on the sale date, which is typically the point of high bid acceptance. Upon high bid acceptance, a legal binding contract is formed with the member, and the gross sales price is recorded as revenue.
The Company also provides a number of services to the buyer of the vehicle, charging a separate fee for each service. Each of these services has been assessed to determine whether the requirements have been met to separate them into units of accounting within a multiple-element arrangement. The Company has concluded that the sale and the post-sale services are separate units of accounting. The fees for sale services are recognized upon completion of the sale, and the fees for the post-sale services are recognized upon successful completion of those services using the relative selling price method.
The Company also charges members an annual registration fee for the right to participate in its vehicle sales program, which is recognized ratably over the term of the arrangement, and relist and late-payment fees, which are recognized upon receipt of payment by the member. No provision for returns has been established, as all sales are final with no right of return, although the Company provides for bad debt expense in the case of non-performance by its members or sellers.
The Company allocates arrangement consideration based upon management’s best estimate of the selling price of the separate units of accounting contained within an arrangement containing multiple deliverables. Significant inputs in the Company’s estimates of the selling price of separate units of accounting include market and pricing trends, pricing customization and practices, and profit objectives for the services.
Vehicle Pooling Costs
The Company defers in vehicle pooling costs certain yard operation expenses 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 certain facility costs, labor, transportation and vehicle processing. If the allocation factors change, then yard operation expenses could increase or decrease correspondingly in the future. These costs are expensed as vehicles are sold in the subsequent periods on an average cost basis.
The Company applies the provisions of accounting guidance for subsequent measurement of inventory to our vehicle pooling costs. The provision requires that items such as idle facility expense, double freight and re-handling costs be recognized as current period charges regardless of whether they meet the criteria of “abnormal” as provided in the guidance. In addition, the guidance requires that the allocation of fixed production overhead to the costs of conversion be based on the normal capacity of production facilities.
In early November 2012, Hurricane Sandy hit the northeastern coast of the United States. As a result of the extensive flooding that it caused, the Company expended additional costs for (i) temporary storage facilities; (ii) premiums for subhaulers as they were reassigned from other regions; and (iii) labor costs incurred for overtime, travel and lodging due to the reassignment of employees to the affected region. These costs, which are characterized as “abnormal” under ASC 330, Inventory, were expensed as incurred and not included in inventory. At July 31, 2013, the incremental salvage vehicles received as a result of Hurricane Sandy have been sold.
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 Canadian dollar, the British pound, the U.A.E. dirham, the Brazilian real and the Euro 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 are as follows (in thousands):
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 generally accepted accounting principles. In accordance with ASC 820, Fair Value Measurements and Disclosures, as amended by Accounting Standards Update 2011-04, 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:
The amounts recorded for financial instruments in the Company’s consolidated financial statements, which included cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their fair values as of July 31, 2013 and July 31, 2012, 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 9. Long-Term Debt for fair value disclosures related to the Company’s long-term debt.
Derivatives and Hedging
The Company has entered into two interest rate swaps to eliminate interest rate risk on the Company’s variable rate Term Loan, and the swaps are designated as effective cash flow hedges under ASC 815, Derivatives and Hedging (see Note 10. Derivatives and Hedging). Each quarter, the Company measures hedge effectiveness using the “hypothetical derivative method” and records in earnings any hedge ineffectiveness with the effective portion of the hedges change in fair value recorded in other comprehensive income or loss.
Cost of Vehicle Sales
Cost of vehicle sales includes the purchase price of vehicles sold for the Company’s own account.
Yard Operations
Yard operations consist primarily of operating personnel (which includes yard management, clerical and yard employees), rent, contract vehicle towing, insurance, fuel and equipment maintenance and repair. The Company recognizes, within yard operation expenses, the costs of pre-sale services, including towing, title processing, and preparation and storage, at the time the related services are provided.
General and Administrative Expenses
General and administrative expenses consist primarily of executive, accounting and data processing, sales personnel, professional services, system maintenance and enhancements and marketing expenses.
Advertising
All advertising costs are expensed as incurred and are included in general and administrative expenses on the consolidated statements of income. Advertising expenses were $5.0 million, $6.5 million and $8.8 million in fiscal 2013, 2012 and 2011, respectively.
Other (Expense) Income
Other (expense) income consists primarily of interest expense, interest income, gains and losses from the disposal of fixed assets and rental income.
Net Income Per Share
Basic net income per share amounts were computed by dividing consolidated net income by the weighted average number of common shares outstanding during the period. Diluted net income per share amounts were computed by dividing consolidated net income by the weighted average number of common shares outstanding plus dilutive potential common shares calculated for stock options outstanding during the period using the treasury stock method.
Cash, Cash Equivalents and Marketable Securities
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 and cash equivalents include cash held in checking and money market accounts. The Company periodically invests its excess cash in money market funds and U.S. Treasury Bills. The Company’s cash and cash equivalents are placed with high credit quality financial institutions. The Company generally classifies its investment portfolio not otherwise qualifying as cash and cash equivalents as available-for-sale securities. Available-for-sale securities are reported at fair value, with unrealized gains and losses reported as a component of stockholders’ equity and comprehensive income. Unrealized losses are charged against income when a decline in the fair market value of an individual security is determined to be other than temporary. Realized gains and losses on investments are included in interest income.
Bank Overdraft
As a result of maintaining a consolidated cash management system, the Company utilizes controlled disbursement bank accounts. These accounts are funded as checks are presented for payment, not when checks are issued. The resulting bank overdraft position is included in current liabilities.
Inventory
Inventories of purchased vehicles are stated at the lower of cost or estimated realizable value. Cost includes the Company’s cost of acquiring ownership of the vehicle. The cost of vehicles sold is charged to cost of vehicle sales as sold on a specific identification basis.
Accounts Receivable
Accounts receivable, which consist primarily of advance charges due from insurance companies and the gross sales price of the vehicle due from members, are recorded when billed, advanced or accrued and represent claims against third parties that will be settled in cash.
Allowance for Doubtful Accounts
The Company maintains an allowance for doubtful accounts in order to provide for estimated losses resulting from disputed amounts billed to sellers or members and the inability of sellers or members to make required payments. If billing disputes exceed expectations and/or if the financial condition of sellers or members were to deteriorate, additional allowances may be required. The allowance is calculated by considering both seller and member accounts receivables written off during the previous 12 month period as a percentage of the total accounts receivable balance.
Concentration of Credit Risk
Financial instruments, which subject the Company to potential credit risk, consist of its cash and cash equivalents, short-term investments and accounts receivable. The Company adheres to its investment policy when placing investments. The investment policy has established guidelines to limit the Company’s exposure to credit expense by placing investments with high credit quality financial institutions, diversifying its investment portfolio, limiting investments in any one issuer or pooled fund and placing investments with maturities that maintain safety and liquidity. The Company places its cash and cash equivalents with high credit quality financial institutions. Deposits with these financial institutions may exceed the amount of insurance provided; however, these deposits typically are redeemable upon demand and, therefore, the Company believes that the financial risks associated with these financial instruments are minimal.
The Company performs ongoing credit evaluations of its customers, and generally does not require collateral on its accounts receivable. The Company estimates its allowances for doubtful accounts based on historical collection trends, the age of outstanding receivables and existing economic conditions. If events or changes in circumstances indicate that specific receivable balances may be impaired, further consideration is given to the collectability of those balances and the allowance is adjusted accordingly. Past-due account balances are written off when the Company’s internal collection efforts have been unsuccessful in collecting the amount due. The Company does not have off-balance sheet credit exposure related to its customers and to date, the Company has not experienced significant credit related losses.
No single customer accounted for more than 10% of our revenues in fiscal 2013, 2012 and 2011. At July 31, 2013, one customer accounted for more than 10% of the Company’s accounts receivables and at July 31, 2012 no single customer accounted for more than 10% of the Company’s accounts receivables.
Property and Equipment
Property and equipment is stated at cost, less accumulated depreciation and amortization. Leasehold improvements are amortized on a straight-line basis over the shorter of the lease term or the estimated useful lives of the respective improvements, which is between 5 and 10 years. Significant improvements which substantially extend the useful lives of assets are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. Depreciation and amortization is computed on a straight-line basis over the estimated useful lives of: 3 to 5 years for internally developed or purchased software; 3 to 7 years for
transportation and other equipment; 3 to 10 years for office furniture and equipment; and 15 to 40 years or the lease term, whichever is shorter, for buildings and improvements. Amortization of equipment under capital leases is included in depreciation expense. Long-Lived Asset Valuation
The Company evaluates long-lived assets, including property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In accordance with ASC 360, Property, Plant, and Equipment, a long-lived asset is initially measured at the lower of its carrying amount or fair value. An impairment loss is recognized when the estimated undiscounted future cash flows expected to be generated from the use of the asset are less than the carrying amount of the asset. The impairment loss is then calculated by comparing the carrying amount with its fair value, which is usually estimated using discounted cash flows expected to be generated from the use of the asset.
Goodwill and Other Identifiable Intangible Assets
In accordance with ASC 350-30-35, Intangibles—Goodwill and Other, goodwill is not amortized but is tested for potential impairment, at a minimum on an annual basis, or when indications of potential impairment exist. The Company performed its annual impairment test for goodwill during the fourth quarter of its 2013 fiscal year utilizing a market value and discounted cash flow approach. The impairment test for identifiable intangible assets not subject to amortization is also performed annually or when impairment indicators exist. The impairment test consists of a comparison of the fair value of the intangible asset with its carrying amount. Identifiable intangible assets that are subject to amortization are evaluated for impairment using a process similar to that used to evaluate other long-lived assets.
Assets Held for Sale
The Company has removed certain assets from operations and offered them for sale. These assets, which include certain real estate, are reflected at their fair market value in the financial statements and are a Level II fair value measurement based on sales transactions of similar assets. During the year ended July 31, 2012, the Company recorded an impairment of $8.8 million associated with the write down to fair market value of these assets held for sale.
Retained Insurance Liabilities
The Company is partially self-insured for certain losses related to medical, general liability, workers’ compensation and auto liability. The Company’s insurance policies are subject to a $250,000 deductible per claim, with the exception of its medical policy which is $225,000 per claim. In addition, each of the Company’s policies contains an aggregate stop loss which limits its ultimate exposure. The Company’s liability represents an estimate of the ultimate cost of claims incurred as of the balance sheet date. The estimated liability is not discounted and is established based upon analysis of historical data and actuarial estimates. The primary estimates used in the actuarial analysis include total payroll and revenue. The Company’s estimates have not materially fluctuated from actual results. While the Company believes these estimates are reasonable based on the information currently available, if actual trends, including the severity of claims and medical cost inflation, differ from the Company’s estimates, the Company’s consolidated results of operations, financial position or cash flows could be impacted. The process of determining the Company’s insurance reserves requires estimates with various assumptions, each of which can positively or negatively impact those balances. As of July 31, 2013 and 2012 the total amount reserved for related self-insured claims is $6.1 million and $5.7 million, respectively.
Stock-Based Compensation
The Company accounts for our 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 payment awards made to employees, consultants and directors based on estimated fair value. The Company adopted ASC 718 using the modified-prospective transition method. Under this transition method, stock-based compensation cost recognized in the fiscal years ended July 31, 2013, 2012 and 2011 includes stock-based compensation expense for all stock-based payment awards granted prior to, but not yet vested as of August 1, 2005, based on the measurement date (generally the grant date) fair value estimated in accordance with the original provisions of ASC 718, and stock-based compensation expense for all stock-based payment awards granted subsequent to August 1, 2005, based on the measurement date fair value estimated in accordance with the provisions of ASC 718. ASC 718 requires companies to estimate the fair value of stock-based payment awards on the measurement date using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized in expense over the requisite service periods. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.
Option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company’s employee stock options have characteristics significantly different from those of traded options and because changes in the input assumptions can materially affect their fair value estimate, it is the Company’s opinion that the existing models do not necessarily provide a reliable single measure of the fair value of the employee stock options.
The fair value of each option was estimated on the measurement date using the Black-Scholes Merton (BSM) option-pricing model utilizing the following assumptions:
Expected life—The Company’s expected life represents the period that the Company’s stock-based payment 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 payment awards, vesting schedules and expectations of future employee behavior as influenced by changes to the terms of its stock-based payment awards.
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.
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 forfeitures—When estimating forfeitures, the Company considers voluntary and involuntary termination behavior as well as analysis of actual option forfeitures.
Net cash proceeds from the exercise of stock options were $21.4 million, $13.7 million and $7.1 million for the years ended July 31, 2013, 2012 and 2011 respectively. The Company realized an income tax benefit of $6.1 million, $4.4 million and $3.5 million from stock option exercises during the years ended July 31, 2013, 2012 and 2011 respectively. In accordance with ASC 718, the Company presents excess tax benefits from disqualifying dispositions of the exercise of incentive stock options, vested prior to August 1, 2005, if any, as financing cash flows rather than operating cash flows.
Comprehensive Income
Comprehensive income includes all changes in stockholders’ equity during a period from non-stockholder sources. For the years ended July 31, 2013 and 2012 accumulated other comprehensive loss was the effect of foreign currency translation adjustments and the effective portion of the interest rate swaps’ change in fair value. For the year ended July 31, 2011 the only item in accumulated other comprehensive loss was the effect of foreign currency translation adjustments. Deferred taxes are not provided on cumulative translation adjustments where the Company expects earnings of a foreign subsidiary to be indefinitely reinvested.
Segment Reporting
The Company’s North American region and its United Kingdom region are considered two separate operating segments, which have been aggregated into one reportable segment because they share similar economic characteristics.
Recently Issued Accounting Standards
In May 2011, the FASB issued ASU 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (IFRS). Under ASU 2011-04 the guidance amends certain accounting and disclosure requirements to ensure that fair value has the same meaning in U.S. GAAP and in IFRS and that the respective fair value measurement and disclosure requirements are the same. ASU 2011-04 is effective for public entities during interim and annual periods beginning after December 15, 2011. The Company’s adoption of ASU 2011-04 did not have a material impact on the Company’s consolidated results of operations and financial position.
In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income, which amends current comprehensive income guidance. This accounting update eliminates the option to present the components of other comprehensive income as part of the statement of shareholders’ equity. Instead comprehensive income must be reported in either a single continuous statement of comprehensive income which contains two sections, net income and other comprehensive income, or in two separate but consecutive statements. ASU 2011-05 is effective for public entities during the interim and annual periods beginning after December 15, 2011. The Company’s adoption of ASU 2011-05 did not have a material impact on the Company’s consolidated results of operations and financial position.
In September 2011, the FASB issued ASU 2011-08, Intangibles—Goodwill and Other (Topic 350): Testing Goodwill for Impairment, which simplifies how entities test goodwill for impairment. ASU 2011-08 gives entities the option, under certain circumstances, to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether further impairment testing is necessary. ASU 2011-08 is effective for fiscal years beginning after December 15, 2011. The Company’s adoption of ASU 2011-08 did not have a material impact on the Company’s consolidated results of operations and financial position.
In July 2012, the FASB issued ASU 2012-02, Testing Indefinite-Lived Intangible Assets for Impairment, which amended the guidance in ASU 2011-08 to simplify the testing of indefinite-lived intangible assets other than goodwill for impairment. ASU 2012-02 is effective for annual and interim impairment tests performed for fiscal years beginning September 15, 2012. The Company’s adoption of ASU 2012-02 did not have a material impact on the Company’s consolidated results of operations and financial position.
In February 2013, the FASB issued ASU 2013-02, “Reporting Amounts Reclassified Out of Accumulated Other Comprehensive Income,” which amends ASC 220, “Comprehensive Income.” The amended guidance requires entities to provide information about the amounts reclassified out of accumulated other comprehensive income by component. Additionally, entities are required to present, either on the face of the financial statements or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income. The amended guidance does not change the current requirements for reporting net income or other comprehensive income. The amendments are effective prospectively for reporting periods beginning after December 15, 2012. The Company’s adoption of ASU 2013-02 did not have a material impact on the Company’s condensed consolidated results of operations and financial position.
Reclassifications
Certain reclassifications have been made to prior years’ consolidated financial statements to conform to the classifications used in fiscal 2013.
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Net Income Per Share (Tables)
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Schedule of reconciliation of basic weighted shares outstanding to diluted weighted average shares outstanding |
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Quarterly Information
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Quarterly Information (in thousands, except per share data) (Unaudited) |
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Cash, Cash Equivalents and Marketable Securities (Tables)
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Schedule of cash and cash equivalents | As of July 31, 2013, cash and cash equivalents include the following (in thousands):
As of July 31, 2012, cash and cash equivalents include the following (in thousands):
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Accounts Payable and Accrued Liabilities (Tables)
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Schedule of accounts payable and accrued liabilities |
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Restructuring (Detail Textuals 1) (USD $)
In Millions, unless otherwise specified |
12 Months Ended |
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Jul. 31, 2013
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Property, Plant and Equipment [Line Items] | |
Additional depreciation expense to be recorded for the fiscal year 2014 | $ 2.9 |
Additional depreciation expenses recognized during current period | $ 7.0 |
Data Centers
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Property, Plant and Equipment [Line Items] | |
Average useful lives of data center | 60 months |
Revised average useful lives of data center | 45 months |
Accounts Receivable, Net (Details 1) (USD $)
In Thousands, unless otherwise specified |
12 Months Ended | ||
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Jul. 31, 2013
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Jul. 31, 2012
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Jul. 31, 2011
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Allowance for Doubtful Accounts Receivable [Roll Forward] | |||
Balance at Beginning of Year | $ 2,920 | $ 3,122 | $ 2,841 |
Charged to Costs And Expenses | 1,424 | 1,626 | 478 |
Deductions to Bad Debt | (1,661) | (1,828) | (197) |
Balance at End of Year | $ 2,683 | $ 2,920 | $ 3,122 |