Stockholders' Equity

12 Months Ended

Jul. 31, 2012

(11)

Stockholders’ Equity

General

The Company has authorized the issuance of 180 million shares of common stock, with a par value of $0.0001, of which 124,393,700 shares were issued and outstanding at July 31, 2012. As of July 31, 2012 and 2011, the Company has reserved 18,170,575 and 19,651,848 shares of common stock, respectively, for the issuance of options granted under the Company’s stock option plans and 1,325,651 and 1,423,420 shares of common stock, respectively, for the issuance of shares under the Copart, Inc. Employee Stock Purchase Plan (ESPP). The Company has authorized the issuance of 5 million shares of preferred stock, with a par value of $0.0001, none of which were issued or outstanding at July 31, 2012 or 2011, which have the rights and preferences as the Company’s Board of Directors shall determine, from time to time.

On March 8, 2012, the Company’s board of directors approved a two-for-one stock split effected in the form of a stock dividend. The additional shares resulting from the stock split were distributed after the closing of trading on March 28, 2012 to stockholders of record on March 23, 2012.

Stock Repurchase

On September 22, 2011, the Company’s board of directors approved a 40 million share increase in the Company’s stock repurchase program, bringing the total current authorization to 98 million shares. The repurchases may be effected through solicited or unsolicited transactions in the open market or in privately negotiated transactions. No time limit has been placed on the duration of the stock repurchase program. Subject to applicable securities laws, such repurchases will be made at such times and in such amounts as the Company deems appropriate and may be discontinued at any time. For the year ended July 31, 2012, the Company repurchased 8,880,708 shares of our common stock at a weighted average price of $22.51. For the year ended July 31, 2011, the Company repurchased 13,364,634 shares of our common stock at a weighted average price of $20.42. For the year ended July 31, 2010, the Company repurchased 242,502 shares of our common stock at a weighted average price of $18.38. As of July 31, 2012, the total number of shares repurchased under the program was 49,786,782 and 48,213,218 shares were available for repurchase under the program. See Note 17. Related Party Transactions, for discussion of related party stock repurchases.

Additionally, on January 14, 2011, the Company completed a tender offer to purchase up to 21,052,630 shares of its common stock at a price of $19.00 per share. Directors and executive officers of Copart were expressly prohibited from participating in the tender offer by our board of directors under the Company’s Securities Trading Policy. In connection with the tender offer, the Company accepted for purchase 24,344,176 shares of its common stock. The shares accepted for purchase are comprised of the 21,052,630 shares the Company offered to purchase and an additional 3,291,546 shares purchased pursuant to the Company’s right to purchase additional shares up to 2% of its outstanding shares. The shares purchased as a result of the tender offer are not part of the Company’s repurchase program. The purchase of the shares of common stock was funded by the proceeds relating to the issuance of long term debt. The impact dilutive earnings per share of all repurchased shares on the weighted average number of common shares outstanding for the year ended July 31, 2012 is $0.04.

In the first and fourth quarters of fiscal year 2010, certain executive officers exercised stock options through cashless exercises. In the second, third and fourth quarters of fiscal year 2011, certain executive officers exercised stock options through cashless exercises. In the first, second and third quarters of fiscal year 2012, certain executive officers exercised stock options through cashless exercises. A portion of the options exercised were net settled in satisfaction of the exercise price and federal and state minimum statutory tax withholding requirements. The Company remitted $2.6 million, $4.2 million and $7.4 million, in fiscal 2012, 2011 and 2010, respectively, to the proper taxing authorities in satisfaction of the employees’ minimum statutory withholding requirements. The exercises are summarized in the following table:

Period		Exercise Price					Share Price for Withholding		Tax Withholding (in 000’s)
FY 2010—Q1	647,262	$	6.52	228,708	191,492	227,062	$	18.45	$	3,533
FY 2010—Q4	700,000	$	6.46	245,844	211,654	242,502	$	18.38	$	3,890
FY 2011—Q2	177,500	$	8.47	76,050	37,834	63,616	$	19.76	$	748
FY 2011—Q3	548,334	$	11.02	295,496	118,032	134,806	$	20.40	$	2,408
FY 2011—Q4	180,000	$	9.48	76,396	48,366	55,238	$	22.33	$	1,080
FY 2012—Q1	40,000	$	9.00	16,082	8,974	14,944	$	22.39	$	201
FY 2012—Q2	20,000	$	9.00	7,506	4,584	7,910	$	23.98	$	110
FY 2012—Q3	322,520	$	10.74	131,298	85,684	105,538	$	26.38	$	2,260

(1)

Shares withheld for taxes are treated as a repurchase of shares for accounting purposes but do not count against the Company’s stock repurchase program.

Employee Stock Purchase Plan

The ESPP provides for the purchase of up to an aggregate of 5 million shares of common stock of the Company by employees pursuant to the terms of the ESPP. The Company’s ESPP was adopted by the Board of Directors and approved by the stockholders in 1994. The ESPP was amended and restated in 2003 and again approved by the stockholders. Under the ESPP, employees of the Company who elect to participate have the right to purchase common stock at a 15 percent discount from the lower of the market value of the common stock at the beginning or the end of each six month offering period. The ESPP permits an enrolled employee to make contributions to purchase shares of common stock by having withheld from their salary an amount up to 10 percent of their compensation (which amount may be increased from time to time by the Company but may not exceed 15% of compensation). No employee may purchase more than $25,000 worth of common stock (calculated at the time the purchase right is granted) in any calendar year. The Compensation Committee of the Board of Directors administers the ESPP. The number of shares of common stock issued pursuant to the ESPP during each of fiscal 2012, 2011 and 2010 was 97,769, 127,192 and 136,070, respectively. As of July 31, 2012, 3,674,349 shares of common stock have been issued pursuant to the ESPP and 1,325,651 shares remain available for purchase under the ESPP.

Stock Options

In December 2007, the Company adopted the Copart, Inc. 2007 Equity Incentive Plan (Plan), presently covering an aggregate of 8.0 million shares of the Company’s common stock. The Plan provides for the grant of incentive stock options, restricted stock, restricted stock units and other equity-based awards to employees and non-qualified stock options, restricted stock, restricted stock units and other equity-based awards to employees, officers, directors and consultants at prices not less than 100% of the fair market value for incentive and non-qualified stock options, as determined by the Board of Directors at the grant date. Incentive and non-qualified stock options may have terms of up to ten years and vest over periods determined by the Board of Directors. Options generally vest ratably over a five-year period. The Plan replaced the Company’s 2001 Stock Option Plan. At July 31, 2012, 1,991,539 shares were available for future grant under the Plan.

In April 2009, the Compensation Committee of the Company’s Board of Directors, following stockholder approval of proposed grants at a special meeting of stockholders, approved the grant to each Willis J. Johnson, the Company’s Chairman (and then Chief Executive Officer), and A. Jayson Adair, the Company’s Chief Executive Office (and then President), of nonqualified stock options to purchase 4,000,000 shares of the Company’s common stock at an exercise price of $15.11 per share, which equaled the closing price of the Company’s common stock on April 14, 2009, the effective date of grant. Such grants were made in lieu of any cash salary or bonus compensation in excess of $1.00 per year or the grant of any additional equity incentives for a five-year period. Each option will become exercisable over five years, subject to continued service by the executive, with twenty percent (20%) vesting on April 14, 2010, and the balance vesting ratably over the subsequent four years. Each option will become fully vested, assuming continued service, on April 14, 2014, the fifth anniversary of the date of grant. If, prior to a change in control, either executive’s employment is terminated without cause, then one hundred percent (100%) of the shares subject to that executive’s stock option will immediately vest. If, upon or following a change in control, either the Company or a successor entity terminates the executive’s service without cause, or the executive resigns for good reason, then one hundred percent (100%) of the shares subject to his stock option will immediately vest. The total compensation expense to be recognized by the Company over the five year service period is $26.1 million dollars per grant. The Company recognized $10.2 million, $10.2 million, and $10.1 million in compensation expense in fiscal 2012, 2011 and 2010, respectively relating to these grants.

The following table sets forth stock-based compensation expense included in the company’s consolidated statements of income (in thousands):

	Years Ended July 31,
	2012		2011		2010
General and administrative	$	18,802	$	17,976	$	16,846
Yard operations		2,989		1,031		1,109
Total	$	21,791	$	19,007	$	17,955

There were no material compensation costs capitalized as part of the cost of an asset as of July 31, 2012 and 2011.

A summary of the status of the Company’s non-vested shares as of July 31, 2012 and changes during fiscal 2012 is as follows:

			Weighted Average Grant- date Fair Value
Non-vested shares at July 31, 2011	8,328		$	6.66
Grants of options	880			6.01
Vested	(3,156	)		6.63
Forfeitures or expirations	(39	)		5.33
Non-vested shares at July 31, 2012	6,013		$	6.59

Option activity for the year ended July 31, 2012 is summarized as follows:

			Weighted- Average Exercise Price			Aggregate Intrinsic Value (in 000’s)
Outstanding at July 31, 2011	16,705		$	15.50	7.18	$	103,979
Grants of options	880			22.54	—		—
Exercises	(1,367	)		11.58	—		—
Forfeitures or expirations	(39	)		16.43	—		—
Outstanding at July 31, 2012	16,179		$	16.24	6.60	$	121,977
Exercisable at July 31, 2012	10,166		$	15.38	6.02	$	85,146
Vested and expected to vest at July 31, 2012	15,533		$	16.21	6.61	$	117,326

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

The aggregate intrinsic value in the table above represents the total pretax intrinsic value (i.e., the difference between the Company’s closing stock price on the last trading day of the year ended July 31, 2012 and the exercise price, times the number of shares) that would have been received by the option holders had all option holders exercised their options on July 31, 2012. The aggregate intrinsic value of options exercised was $16.6 million, $16.2 million and $19.0 million in the fiscal years ended July 31, 2012, 2011 and 2010, respectively, and represents the difference between the exercise price of the option and the estimated fair value of the Company’s common stock on the dates exercised. As of July 31, 2012, the total compensation cost related to non-vested stock-based payment awards granted to employees under the Company’s stock option plans but not yet recognized was $35.4 million, net of estimated forfeitures. This cost will be amortized on a straight-line basis over a weighted average remaining term of 2.44 years and will be adjusted for subsequent changes in estimated forfeitures. The fair value of options vested in fiscal 2012, 2011 and 2010 is $20.9 million, $19.6 million and $19.6 million, respectively.

A summary of stock options outstanding and exercisable at July 31, 2012 follows:

	Options Outstanding						Options Exercisable
Range of Exercise Prices	Number Outstanding at July 31, 2012 (in 000’s)		Weighted- Average Remaining Contractual Life		Weighted- Average Exercise Price		Number Exercisable at July 31, 2012 (in 000’s)		Weighted- Average Exercise Price
$3.87–$11.87		479		1.25	$	7.49		479	$	7.49
$12.01–$14.95		1,090		3.90	$	12.72		1,089	$	12.72
$15.11–$15.11		8,000		6.71	$	15.11		5,200	$	15.11
$16.38–$26.08		6,610		7.30	$	18.82		3,398	$	17.78
		16,179		6.60	$	16.24		10,166	$	15.38

On March 6, 2003, the Company’s Board of Directors declared a dividend of one right (Right) to purchase one-thousandth share of the Company’s Series A Participating Preferred Stock for each outstanding share of Common Stock of the Company. Each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series A Preferred Stock at an exercise price of $120.48.

On January 10, 2012, the Company entered into an amendment to the Preferred Stock Rights Agreement, dated as of March 6, 2003, as amended on March 15, 2006, between the Company and Computershare Trust Company, N.A. (formerly Equiserve Trust Company, N.A.), as Rights Agent (collectively the “Rights Agreement”). The Amendment accelerated the Final Expiration Date of the Company’s Series A Participating Preferred Stock purchase rights (the “Rights”) from March 21, 2013 to January 10, 2012, and resulted in a termination of the Rights Agreement and the expiration of all outstanding Rights effective as of January 10, 2012.