COPART INC - 10-K Annual Report

California (State or other jurisdiction of incorporation or organization)		94-2867490 (I.R.S. Employer Identification Number)
5500 E. Second Street Benicia, California (Address of principal executive offices)		94510 (Zip code)

Securities registered pursuant to Section 12(g) of the Act: Common Stock
(Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý

The aggregate market value of voting stock held by non-affiliates of the registrant as of October 14, 2002 was $602,704,000 based upon the last sales price reported for such date on the Nasdaq National Market. For purposes of this disclosure, shares of Common Stock held by persons who hold more than 5% of the outstanding shares of Common Stock and shares held by officers and directors of the registrant, have been excluded in that such persons may be deemed to be affiliates. This determination is not necessarily conclusive for other purposes.

At October 14, 2002, registrant had outstanding 92,264,859 shares of Common Stock.

Items 10, 11, 12, and 13 of Part III incorporate certain information by reference from the registrant's definitive proxy statement for the Annual Meeting of Shareholders to be held on December 4, 2002 (the "Proxy Statement"). Except with respect to the information specifically incorporated by reference, the Proxy Statement is not deemed to be filed as a part hereof.

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. In some cases, you can identify forward-looking statements by terms such as "may," "will," "should," "expect," "plan," "intend," "forecast," "anticipate," "believe," "estimate," "predict," "potential," "continue" or the negative of these terms or other comparable terminology. The forward-looking statements contained in this report involve known and unknown risks, uncertainties and situations that may cause our or our industry's actual results, level of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these statements. These factors include those listed under the caption "Factors That May Affect Future Results" beginning on page 12 of this report and those discussed elsewhere in this report. We encourage investors to review these factors carefully.

Although we believe that, based on information currently available to Copart and its management, the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. You should not place undue reliance on these forward-looking statements.

Copart, Inc. is a leading provider of salvage vehicle auction services in the United States.

We provide vehicle suppliers, primarily insurance companies, with a full range of services to process and sell salvage vehicles through auctions, principally to licensed vehicle dismantlers, rebuilders, repair licensees and used vehicle dealers. Salvage vehicles are either damaged vehicles deemed a total loss for insurance or business purposes or are recovered stolen vehicles for which an insurance settlement with the vehicle owner has already been made. We offer vehicle suppliers a full range of services that expedite each stage of the salvage vehicle auction process and minimize administrative and processing costs. We generate revenues primarily from auction fees paid by vehicle suppliers and vehicle buyers as well as related fees for services such as towing and storage.

We have grown our salvage business through a combination of acquisitions and the development of new facilities, and also by increasing our buyer base and implementing additional value-added services for both buyers and suppliers. For fiscal year 2002, our revenues were $316 million and our operating income was $90 million. During the fiscal year ending July 31, 2002, in addition to the public auction sites, we acquired four salvage vehicle auction facilities and opened four new salvage vehicle auction facilities. Our acquisitions included facilities in Savannah, Georgia; Tifton, Georgia; Charleston, West Virginia and Haslet, Texas. We opened new vehicle auction sites in Lyman, Maine; Tucson, Arizona; Somerville, New Jersey and Amarillo, Texas. We continue to evaluate acquisition candidates in both our salvage and public auction businesses.

We believe that we offer the highest level of service in the salvage vehicle auction industry and have established our leading market position as follows:

In recent periods, we have expanded our business beyond salvage vehicle auction services and have entered the market for public auctioning of used vehicles. We auction vehicles directly to the public and automobile dealers on behalf of banks, leasing or financing companies, automobile dealers, repossession companies and for our own account.

To date, we own six public automobile auction facilities located in Detroit, Michigan; Chesapeake, Virginia; New Castle, Delaware; Greencastle, Pennsylvania; Pittsburgh, Pennsylvania and Richmond, Virginia. In April 2001, we announced the creation of Motors Auction Group, Inc. as a wholly owned subsidiary through which we operate our public automobile auction business. To date, revenues from our public auction business have not been material relative to the revenues from our salvage business. We expect to acquire additional public auction facilities in the future as we continue to focus resources on this aspect of our business.

We were organized as a California corporation in 1982 and became a public company in 1994. Our principal executive offices are located at 5500 E. Second Street, Benicia, California 94510, and our telephone number at that address is (707) 748-5000.

The salvage vehicle auction industry provides an outlet for salvage vehicle suppliers to liquidate total loss vehicles. Salvage vehicle auction companies generally auction salvage vehicles on consignment for a fixed fee or a percentage of the sales price. On occasion, salvage auction companies may purchase vehicles from vehicle suppliers at a formula-based price, based on a percentage of the vehicles' estimated pre-loss value ("actual cash value") and auction the vehicles for their own account. Salvage vehicle auction companies typically operate from one or more salvage facilities where vehicles are processed, stored and auctioned.

Although there are other suppliers of salvage vehicles, such as financial institutions, vehicle leasing companies, automobile rental companies and automobile dealers, the primary source of salvage vehicles is insurance companies.

Over the last several years, automobile manufacturers have begun incorporating certain standard features that increase passenger safety, including unibody construction, passenger safety cages with surrounding crumple zones to absorb impacts, plastic components, airbags and computer systems. We believe that one effect of these features is that newer vehicles involved in accidents are more likely to be deemed a total loss for insurance purposes, resulting in an increasing supply of total loss salvage vehicles in the future.

The primary buyers of salvage vehicles are vehicle dismantlers, rebuilders, repair licensees and used vehicle dealers. Vehicle dismantlers, which we believe are the largest group of salvage vehicle buyers, either dismantle a vehicle and sell parts individually or sell the entire vehicle to rebuilders, used vehicle dealers or the public. Vehicle rebuilders and vehicle repair licensees generally purchase salvage vehicles to repair and resell. Used vehicle dealers purchase recovered stolen or slightly damaged vehicles for resale.

Following an accident involving an insured vehicle, the damaged vehicle is generally towed to a towing company or a vehicle repair facility for temporary storage pending insurance company examination. The vehicle is inspected by the insurance company's adjuster, who estimates the costs of repairing the vehicle and gathers information regarding the damaged vehicle's mileage, options and condition in order to estimate its actual cash value. The adjuster determines whether to pay for repairs or to classify the vehicle as a total loss based upon the adjuster's estimate of repair costs and the vehicle's salvage value, as well as customer service considerations. If the cost of repair is greater than the actual cash value less the estimated salvage value, the insurance company generally will classify the vehicle as a total loss. The insurance company will thereafter assign the vehicle to a salvage vehicle auction company, settle with the insured vehicle owner and receive title to the vehicle.

In disposing of a salvage vehicle, a vehicle supplier typically assigns the vehicle to a salvage vehicle auction company. The primary factors that vehicle suppliers consider when selecting a salvage vehicle auction company include:

Upon receipt of the pick up order, a vehicle transport company arranges for the transport of a vehicle to a vehicle auction facility. As a service to the vehicle supplier, the salvage vehicle auction company will customarily pay advance charges (reimbursable charges paid on behalf of vehicle suppliers) to obtain the subject vehicle's release from a

towing company or vehicle repair facility. Typically, advance charges paid on behalf of the vehicle supplier are recovered upon sale of the salvage vehicle.

The vehicle then remains in storage until ownership documents are transferred from the insured vehicle owner and the title to the vehicle is cleared through the appropriate state's motor vehicle regulatory agency (the "DMV"). Total loss vehicles may be sold in most states only after obtaining a salvage certificate from the DMV. Upon receipt of the appropriate documentation from the DMV, which is generally received within 45 to 60 days of vehicle pick-up, the vehicle is auctioned. Vehicles are sold primarily through weekly or biweekly live auctions.

Our growth strategy is to increase our revenues and profitability by, among other things, (i) acquiring and developing new salvage vehicle auction facilities in key markets, (ii) pursuing national and regional vehicle supply agreements, (iii) expanding our service offerings to suppliers and buyers and (iv) developing and expanding public automobile auction facilities. In addition, we implement our pricing structure and merchandising procedures and attempt to affect cost efficiencies at each of our acquired facilities by implementing our operational procedures, integrating our management information systems and redeploying personnel when necessary.

As part of our overall expansion strategy, our objective is to increase our revenues, operating profits and market share in the vehicle auction industry. To implement our growth strategy, we intend to continue to do the following:

Our strategy is to offer integrated services to vehicle suppliers on a national or regional basis by acquiring or developing salvage facilities in new and existing markets. We integrate our new acquisitions into our national network and capitalize on certain operating efficiencies resulting from, among other things, the reduction of duplicative overhead and the implementation of our operating procedures.

The following chart sets forth facilities that we have acquired or opened since the beginning of fiscal year 2000 through July 31, 2002.

Salvage Auction Locations	Acquisition/ Opening Date	Geographic Service Area
Graham, Washington	November 1999	Washington
Denver, Colorado	November 1999	Colorado
Peoria, Illinois	December 1999	Central Illinois
North Boston, Massachusetts	December 1999	Northern Massachusetts, Vermont, New Hampshire, Maine
Boise, Idaho	March 2000	Southern Idaho
Pasco, Washington	March 2000	Eastern Washington
West Palm Beach, Florida	April 2000	South and East Florida
Abilene, Texas	April 2000	North Texas
San Antonio, Texas	May 2000	Central Texas
Albuquerque, New Mexico	May 2000	New Mexico
Harrisburg, Pennsylvania	October 2000	Central Pennsylvania
Chicago Heights, Illinois	January 2001	South Chicago, Chicago Suburbs
Chatham, Virginia	January 2001	Western Virginia
Shreveport, Louisiana	April 2001	Northern Louisiana
Mount Morris, Pennsylvania	April 2001	Western Pennsylvania, Northern West Virginia
Martinez, California	May 2001	Northern California
Lawrenceburg, Kentucky	June 2001	Kentucky
New Orleans, Louisiana	July 2001	Southeast Louisiana, Southern Mississippi
Savannah, Georgia	September 2001	Eastern Georgia, Southern South Carolina
Tifton, Georgia	September 2001	Southern Georgia, Central Panhandle
Charleston, West Virginia	October 2001	West Virginia
Lyman, Maine	April 2002	Maine
Tucson, Arizona	May 2002	Southern Arizona
Somerville, New Jersey	May 2002	Northern New Jersey
Haslet, Texas	June 2002	Fort Worth
Amarillo, Texas	July 2002	Amarillo, Texas Panhandle

Public Auction Locations	Acquisition/ Opening Date	Geographic Service Area
Chesapeake, Virginia	November 1999	Virginia
New Castle, Delaware	August 2001	Delaware
Greencastle, Pennsylvania	July 2002	Pennsylvania

Our broad national presence enhances our ability to enter into local, regional or national supply agreements with vehicle suppliers. We actively seek to establish national and regional supply agreements with insurance companies by promoting our ability to achieve high net returns and broader access to buyers through our national coverage and electronic commerce capabilities. By utilizing our existing insurance company supplier relationships, we are able to build new supplier relationships and pursue additional supply agreements in existing and new markets.

Over the past several years, we have expanded our available service offerings to vehicle suppliers and buyers. The primary focus of these new service offerings is to maximize returns to our suppliers and maximize product value to our buyers. Recent service enhancements include, for our suppliers, real-time access to sales data over the Internet and, for our buyers, the ability to bid on vehicles via the Internet in real-time. We plan to continue to refine and expand our services, including offering software that can assist our suppliers in expediting claims and salvage management tools that help suppliers integrate their systems with ours.

The public automobile auction industry is highly fragmented, consisting primarily of small local operations, and we believe that it currently presents opportunities for consolidation. To expand our geographic reach, we plan to acquire or develop new public automobile auction facilities as favorable opportunities arise. Our public automobile auctions allow the general public to bid via the Internet or at live auctions on a wide range of end-of-lease vehicles, repossessed vehicles, dealer trade-ins and vehicles that we offer for sale on a consignment basis. We have established the systems, infrastructure, and management required to begin expanding our public automobile auction business. To date, we have acquired six facilities and launched our public automobile auction website. We believe that our combination of experience and expertise, along with our established reputation for acquiring and integrating salvage vehicle auction operations, gives us the relevant experience to pursue future acquisitions and development of public automobile auction facilities.

We believe that the following attributes and the services that we offer position us to take advantage of many opportunities in the salvage vehicle auction industry.

Since our inception in 1982, we have expanded from a single facility in Vallejo, California to an integrated network of 94 facilities located in 40 states as of July 31, 2002. We are able to offer integrated services on a national basis to our vehicle suppliers, which allows us to respond to the needs of our suppliers and buyers with maximum efficiency. Our national coverage provides our suppliers with key advantages, including:

We believe that we offer the most comprehensive range of services in our industry, including:

We have a proven track record of successfully acquiring and integrating salvage vehicle auction facilities. Since becoming a public company in 1994, we have completed the acquisition of 54 salvage vehicle auction facilities. As part of our acquisition and integration strategy, we seek to:

We strive to integrate all new facilities into our existing national network without disruption of service to vehicle suppliers. We work with new suppliers to implement our fee structures and new service programs. We typically retain existing employees at acquired facilities in order to gain knowledge about, and respond to, the local market. We also assign a special integration team to help convert newly acquired facilities to our own management information and proprietary software systems, enabling us to ensure a smooth and consistent transition to our business operating and auction systems.

We have developed management information and proprietary software systems that allow us to deliver a fully integrated service offering. Our proprietary software programs provide vehicle suppliers with on-line access to data and reports regarding their salvage vehicles being processed at any of our facilities. This technology allows vehicle suppliers to monitor each stage of our salvage vehicle auction process, from pick up to auction and settlement by the buyer. Our full range of Internet services allows us to expedite each stage of the salvage vehicle auction process and minimizes the administrative and processing costs for us as well as our suppliers. We believe that our integrated technology systems generate improved capacity and financial returns for our clients, resulting in high client retention, and allow us to expand our national supply contracts.

We offer vehicle suppliers a full range of services, which expedite each stage of the salvage vehicle auction process, maximize proceeds and minimize costs.

Through Copart Access, our Internet-based service for vehicle suppliers, we enable suppliers to assign vehicles for auction, check auction calendars, view vehicle images and history, view and reprint body shop invoices and towing receipts and view the historical performance of the vehicles sold at our auctions.

We offer Copart ProQuote, a proprietary service that assists suppliers in the vehicle claims evaluation process by providing on-line salvage value estimates, which helps suppliers determine whether to repair a particular vehicle or deem it a total loss.

We operate a fleet of over 600 trucks, which enables us to pick up most of our suppliers' vehicles within 24 hours. To supplement our own fleet of trucks, we also maintain contracts with third-party vehicle transport companies for our facilities. Our national network and transportation capabilities provide cost and time savings to our vehicle suppliers and ensures on-time vehicle pick up and prompt response to catastrophes and natural disasters.

We offer certain of our major insurance company suppliers office and yard space to house vehicle inspection stations on-site at our auction facilities. We have over 30 vehicle inspection stations at our facilities nationwide. An on-site vehicle inspection station provides our insurance company suppliers with a central location to inspect potential total loss vehicles, which reduces storage charges that otherwise may be incurred at the initial storage or repair facility.

We provide vehicle suppliers with on-demand reports on-line, via fax or e-mail that summarize data on salvage vehicles that we process for the particular supplier. These reports track our vehicle suppliers' gross and net returns on each vehicle, service charges, and other data that enable our vehicle suppliers to more easily administer and monitor the salvage vehicle disposition process.

We have extensive expertise in DMV document and title processing for salvage vehicles. We have developed a computer system which provides a direct link to the DMV computer systems of several states. This allows us to expedite the processing of vehicle title paperwork. By facilitating the title acquisition from the insured vehicle owner, we effectively shorten the time period between the auction of salvage vehicles and when our vehicle suppliers receive the proceeds from their sales.

At the election of the vehicle supplier, we auction vehicles pursuant to our Percentage Incentive Program consignment basis or on a fixed fee consignment basis.

Percentage Fee Consignment. Our Percentage Incentive Program ("PIP") is an innovative processing program designed to broadly serve the needs of vehicle suppliers. Under PIP, we agree to sell at auction all of the salvage vehicles of a vehicle supplier in a specified market for a predetermined percentage of the vehicle sales price. Because our revenues under PIP are directly linked to the vehicle's auction price, we have an incentive to actively merchandise those vehicles to maximize the net return on salvage vehicles. We provide the vehicle supplier, at our expense, with transport of the vehicle to our nearest facility, storage for up to 90 days and DMV document and title processing. In addition, we provide merchandising services such as covering or taping openings to protect vehicle interiors from weather, washing vehicle exteriors, vacuuming vehicle interiors, cleaning and polishing dashboards and tires, making keys for driveable vehicles and operating "drive-through" sales auctions of driveable vehicles. We believe our merchandising efforts increase the sales prices of salvage vehicles, thereby increasing the return on salvage vehicles to both vehicle suppliers and us. In fiscal year 2002, we processed approximately 67% of all our salvage vehicles under PIP.

Fixed Fee Consignment. Under our fixed fee consignment program, we sell vehicles for a fixed consignment fee, generally $50 to $175 per vehicle. Although sometimes included in the consignment fee, we may also charge additional fees for the cost of transporting the vehicle to our facility, storage of the vehicle, and other incidental costs. Approximately 33% of all salvage vehicles we processed in fiscal year 2002 were processed under the fixed fee consignment program.

We maintain a database of thousands of registered buyers of salvage vehicles in the vehicle dismantling, rebuilding, repair and resale businesses. Our database includes each buyer's vehicle preference and purchasing history. This data enables us to notify, via e-mail, prospective buyers throughout the region or country of salvage vehicles available for bidding that match their vehicle preferences. Listings of salvage vehicles to be auctioned on a particular day and location are also made available on the Internet.

We offer a flexible and unique auction process designed to maximize the sale prices of the vehicles that we auction. Our live auction process is enhanced by our systems, which permit live Internet bidding from registered buyers to be incorporated into the regular auction process. In addition, prospective buyers are allowed to remotely participate in the auction process by submitting silent bids on-line up to 14 days prior to the actual live auction. The combined use of the Internet bids and live bids helps to ensure that we receive the highest possible price for each vehicle sold. Currently, approximately 47% of the vehicles that we auction receive an Internet bid prior to the actual auction day.

We have also developed other unique systems which we have implemented at some of our facilities that are located in areas which are subject to severe weather conditions. These systems allow such facilities to conduct our regular live auction process as Electronic Video Auctions ("EVAs"). At EVAs, buyers assemble indoors (rather than outdoors in the storage yards) and bid on vehicles as they are displayed on video monitors. EVAs, like all of our other auctions, integrate live bids with previously submitted on-line remote bids. The EVA process helps to ensure higher buyer turn-out and participation rates, thereby achieving maximum sales prices and value for our vehicle suppliers. As of July 31, 2002, EVAs were being used at 57 of our facilities.

CoPartfinder is our unique Internet "search engine" that enables users to locate used vehicle parts quickly and efficiently. CoPartfinder is accessible by the public through its own website. CoPartfinder lists vehicles recently sold at our auctions and identifies the purchasers. This allows vehicle dismantlers and other resellers to streamline their parts sale process and access a large pool of potential buyers. We charge a nominal per-search fee to potential parts buyers, who can use CoPartfinder to search for specific vehicle makes and models and view digital images of vehicles that meet their requirements. Once a specific parts supplier is identified for a specific part requirement, buyers have the option to call, fax, e-mail or instantly message the dismantler/supplier for additional information. We believe that CoPartfinder provides an incentive for vehicle dismantlers to purchase their salvage vehicles through our auction process.

We obtain salvage vehicles from hundreds of different vehicle suppliers. In fiscal year 2002, vehicles supplied by State Farm Insurance Company accounted for approximately 14% of our revenues. No other supplier accounted for more than 10% of our revenues. Of the total number of vehicles that we processed in fiscal year 2002, we obtained approximately 88% from insurance company suppliers. Our arrangements with our suppliers are either written or oral agreements that are typically subject to cancellation by either party upon 30 to 90 days notice.

We typically contract with the regional or branch office of an insurance company or other vehicle suppliers. The agreements are customized to each vehicle supplier's particular needs and often provide for the disposition of different types of salvage vehicles by differing methods. Our contracts or arrangements generally provide that we will sell total loss and recovered stolen vehicles generated by the vehicle supplier in a designated geographic area.

We market our services to vehicle suppliers through an in-house sales force that utilizes a variety of sales techniques, including targeted mailing of our sales literature, telemarketing, follow-up personal sales calls, and participation in trade shows and vehicle and insurance industry conventions. Based upon our historical data on salvage vehicles and vehicle information supplied by vehicle suppliers, our marketing personnel will provide vehicle suppliers with detailed analysis of the net return on salvage vehicles and a proposal setting forth ways in which we believe that we can improve net returns on salvage vehicles and reduce administrative costs and expenses.

We maintain a database of thousands of registered buyers of salvage vehicles in the vehicle dismantling, rebuilding, repair and resale businesses. We believe that we have established a broad buyer base by providing buyers of salvage vehicles with a variety of programs and services. To gain admission to one of our auctions and become a registered buyer, prospective buyers must first pay an initial registration fee and an annual fee, provide requested personal and business information and have, in most states, a vehicle dismantler's, dealer's, resale or repair license. Registration entitles a buyer to transact business at any of our auctions subject to local licensing and permitting requirements. A buyer may also bring guests to an auction for a fee. Strict admission procedures are intended to prevent frivolous bids that would invalidate an auction. We market to buyers on the Internet and via e-mail notifications, sales notices, telemarketing and participation in trade show events. In addition, we have initiated programs specifically designed to address the needs of our wholesale and high volume buyers, including providing streamlined paperwork processing, simplified payment procedures and personalized customer services. No single buyer accounted for more than 2% of our gross proceeds in fiscal year 2002.

We face significant competition for the supply of salvage vehicles and for the buyers of those vehicles. We believe our principal competitors include vehicle auction companies and vehicle dismantlers. These national, regional and local competitors may have established relationships with vehicle suppliers and buyers and may have financial resources that are greater than ours. The largest national or regional vehicle auctioneers include the ADESA Corporation, Auction Broadcasting Company, Insurance Auto Auctions, Inc., Manheim Auctions and SADISCO. The largest national dismantlers include Greenleaf, a subsidiary of Ford Motor Company, and LKQ Corporation. These national dismantlers, in addition to trade groups of dismantlers such as the American Recycling Association and the United Recyclers Group, purchase salvage vehicles directly from insurance companies, thereby bypassing auction companies entirely, including us.

Our primary management information system consists of an expandable, integrated IBM AS/400 mainframe computer system, integrated computer interfaces and proprietary business operating software that we developed and which tracks salvage and public auction vehicles throughout the auction process. We call this proprietary business operating software the Copart Auction System ("CAS") and have implemented CAS at all of our salvage auction facilities. For the public auction business we call this proprietary business operating software Motors Auction Exchange ("MAX"). In addition, we have integrated our mainframe computer system with Internet and Intranet systems in order to provide secure access to CAS and MAX data and images in a variety of formats. We also host our own Intranet and Internet platforms.

As of July 31, 2002, we had approximately 2,532 full-time employees, of whom approximately 206 were engaged in general and administrative functions and approximately 2,326 were engaged in yard and fleet operations. We are not subject to any collective bargaining agreements and believe that our relationships with our employees are good.

Our operations are subject to various laws and regulations regarding the protection of the environment. In the salvage vehicle auction industry, large numbers of wrecked vehicles are stored at auction facilities and, during that time, spills of fuel, motor oils and other fluids may occur, resulting in soil, surface water or groundwater contamination. Certain of our facilities store petroleum products and other hazardous materials in above-ground containment tanks and some of our facilities generate waste materials such as solvents or used oils that must be disposed of as non-hazardous or hazardous waste, as appropriate. We have implemented procedures to reduce the amount of soil contamination that may occur at our facilities, and we have initiated safety programs and training of personnel on the safe storage and handling of hazardous materials. We believe that we are in material compliance with all applicable environmental regulations and we do not anticipate any material capital expenditures to remain in environmental compliance.

In connection with the acquisition of our Dallas, Texas facility in 1994, we set aside $3.0 million to cover the costs of environmental remediation, stabilization and related consulting expenses for a six-acre portion of the facility that contained elevated levels of lead due to the activities of the former operators. We began the stabilization process in 1996 and completed it in 1999. We paid all remediation and related costs from the $3.0 million fund and, in accordance with the acquisition agreement, distributed the remainder of the fund to the seller of the Dallas facility, less $200,000 which was held back to cover the costs of obtaining the no-further-action letter. In September 2002, our environmental engineering consultant issued a report which concludes that the soil stabilization has effectively stabilized lead-impacted soil, and that the concrete cap should prevent impact to storm water and subsequent surface water impact. The consultant will submit an Operations and Maintenance Plan to the Texas regulator providing for a two-year inspection and maintenance plan for the concrete cap, and a two-year annual ground and surface water monitoring plan. If the Operations and Maintenance Plan results demonstrate that the lead-impacted, stabilized soil is not impacting the ground and/or surface water, a no-further-action letter will be requested at that time. We are not assured of receiving the no-further-action letter and we may incur further liabilities if the stabilization process proves ineffective. In addition, in 1994, we detected a small quantity of two hazardous substances in a temporary groundwater monitoring well at the Dallas facility. Our environmental consultants concluded that both substances arose from an off-site source and no further action was recommended.

We do not believe that any of the above environmental matters will, either individually or in the aggregate, have a material adverse effect on us, our financial condition or results of operations.

Our operations are subject to regulation, supervision and licensing under various federal, state and local statutes, ordinances and regulations. The acquisition and sale of damaged and recovered stolen vehicles is regulated by state motor vehicle departments. In addition to the regulation of sales and acquisitions of vehicles, we are also subject to various local zoning requirements with regard to the location of our auction and storage facilities. These zoning requirements vary from location to location. We believe that we are in compliance in all material respects with applicable regulatory requirements. We may be subject to similar types of regulations by federal, state, and local governmental agencies in new markets.

We are involved in litigation and damage claims arising in the ordinary course of business, such as actions related to injuries, property damage or handling or disposal of vehicles. Among this litigation are lawsuits filed in California against us and rental car company vehicle suppliers which purport to be class actions on behalf of California residents who own previously damaged rental car vehicles that were sold through our auctions on clean titles, which plaintiffs contend should have been sold on salvage certificates. We are also involved in various governmental and administrative proceedings primarily relating to licensing and operation of our business. We provide for costs relating to these matters when a loss is probable and the amount may be reasonably estimated. The effect of the outcome of these matters on our future results of operations cannot be predicted because any such effect depends on future results of operations and the amount of timing of the resolution of such matters. While it is not feasible to determine the outcome of these matters, management believes that any ultimate liability will not have a material effect on our financial position, results of operations or cash flows.

We depend on a limited number of major suppliers of salvage vehicles. The loss of one or more of these major suppliers could adversely affect our results of operations and financial condition, and an inability to increase our sources of vehicle supply could adversely affect our growth rates.

Historically, a limited number of vehicle suppliers have accounted for a substantial portion of our revenues. In fiscal year 2002, vehicles supplied by our two largest suppliers accounted for approximately 14% and 9% of our revenues, respectively. Supplier arrangements are either written or oral agreements typically subject to cancellation by either party upon 30 to 90 days notice. Vehicle suppliers have terminated agreements with us in the past in particular markets, which has affected the pricing for auction services in those markets. There can be no assurance that our existing agreements will not be cancelled. Furthermore, there can be no assurance that we will be able to enter into future agreements with vehicle suppliers or that we will be able to retain our existing supply of salvage vehicles. A reduction in vehicles from a significant vehicle supplier or any material changes in the terms of an arrangement with a substantial vehicle supplier could have a material adverse effect on our results of operations and financial condition. In addition, a failure to increase our sources of vehicle supply could adversely affect our earnings and revenue growth rates.

Factors such as mild weather conditions in the United States can have an adverse affect on our revenues and operating results as well as our revenue and earnings growth rates.

Mild weather conditions in the United States tend to result in a decrease in the available supply of salvage vehicles because traffic accidents decrease and fewer automobiles are damaged as a result of weather-related conditions. Accordingly, mild weather can have an adverse effect on our salvage vehicle inventories, which would be expected to have an adverse effect on our revenue and earnings and related growth rates and could have an adverse effect on our operating results. Conversely, our inventories will tend to increase in poor weather such as a harsh winter or as a result of adverse weather-related conditions such as flooding. In September 2002, we reduced our revenue and earnings projections for the fiscal year ending July 31, 2003 as a result of mild weather conditions experienced in the United States for the first nine months of calendar 2002 and the forecast by the National Oceanic and Atmosphere Administration (NOAA) for current drought conditions affecting nearly half of the country to continue into March of 2003. During periods of mild weather conditions, our ability to increase our revenues and improve our operating

results and related growth will be increasingly dependent on our ability to obtain additional vehicle suppliers and to compete more effectively in the market, each of which is subject to the other risks and uncertainties described in these sections.

The salvage vehicle auction industry is highly competitive and we may not be able to compete successfully.

We may also encounter significant competition for local, regional and national supply agreements with vehicle suppliers. There can be no assurance that the existence of other local, regional or national contracts entered into by our competitors will not have a material adverse effect on our business or our expansion plans. Furthermore, we are likely to face competition from major competitors in the acquisition of salvage vehicle auction facilities, which could significantly increase the cost of such acquisitions and thereby materially impede our expansion objectives or have a material adverse effect on our results of operations. These potential new competitors may include consolidators of automobile dismantling businesses, organized salvage vehicle buying groups, automobile manufacturers, automobile auctioneers and software companies. While most vehicle suppliers have abandoned or reduced efforts to sell salvage vehicles directly without the use of service providers such as us, there can be no assurance that this trend will continue, which could adversely affect our market share, results of operations and financial condition. Additionally, existing or new competitors may be significantly larger and have greater financial and marketing resources than us; therefore, there can be no assurance that we will be able to compete successfully in the future.

Because the growth of our business has been due in large part to acquisitions and development of new salvage vehicle auction facilities, the rate of growth of our business and revenues may decline if we are not able to successfully complete acquisitions and development of new facilities.

We seek to increase our sales and profitability through the acquisition of other salvage vehicle auction facilities and the development of new salvage vehicle auction facilities. There can be no assurance that we will be able to:

As we continue to expand our operations, our failure to manage growth could harm our business and adversely affect our results of operations and financial condition.

Our ability to manage growth is not only dependent on our ability to successfully integrate new facilities, but also on our ability to:

Our inability to control or manage these growth factors effectively could have a material adverse effect on our results of operations and financial condition.

We have limited experience in the public automobile auction business and may not be successful in our efforts to compete in this market, which may adversely affect our current growth strategy.

We have historically focused on the operation, acquisition and development of salvage vehicle auction facilities and only have limited experience in operating public automobile auction facilities. The public automobile auction market differs from the salvage vehicle auction market in that used vehicles in general working order are sold to the public. We intend to expand our public automobile auction facilities, through the acquisition of public auction sites and cannot know whether our existing salvage auction business model will translate successfully into the public automobile auction market. To the extent that we cannot successfully compete in the public automobile auction market, our growth strategy could be harmed.

Our annual and quarterly performance may fluctuate, causing the price of our stock to decline.

Our revenues and operating results have fluctuated in the past and can be expected to continue to fluctuate in the future on a quarterly and annual basis as a result of a number of factors, many of which are beyond our control. Factors that may affect our operating results include, but are not limited to, the following:

Due to the foregoing factors, our operating results in one or more future periods can be expected to fluctuate. As a result, we believe that period-to-period comparisons of our results of operations are not necessarily meaningful and should not be relied upon as any indication of future performance. In the event such fluctuations result in our financial performance being below the expectations of public market analysts and investors, the price of our common stock could decline substantially.

Government regulation of the salvage vehicle auction industry may impair our operations, increase our costs of doing business and create potential liability.

Participants in the salvage vehicle auction industry are subject to, and may be required to expend funds to ensure compliance with, a variety of federal, state and local governmental, regulatory and administrative rules, regulations, licensure requirements and procedures, including those governing vehicle registration, the environment, zoning and land use. Failure to comply with present or future regulations or changes in interpretations of existing regulations may result in impairment of our operations and the imposition of penalties and other liabilities. In addition, new regulatory requirements or changes in existing requirements may delay or increase the cost of opening new facilities, may limit our base of salvage vehicle buyers and may decrease demand for our vehicles.

The operation of our auction facilities poses certain environmental risks which could adversely affect our results of operations and financial condition.

Our operations are subject to federal, state and local laws and regulations regarding the protection of the environment. In the salvage vehicle auction industry, large numbers of wrecked vehicles are stored at auction facilities and, during that time, spills of fuel, motor oil and other fluids may occur, resulting in soil, surface water or groundwater contamination. Environmental issues resulting from fuel spills, oil spillage, or similar problems are also present at our public auction facilities. In addition, certain of our facilities generate and/or store petroleum products and other hazardous materials, including waste solvents and used oil. We could incur substantial expenditures for preventative, investigative or remedial action and could be exposed to liability arising from our operations, contamination by previous users of certain of our acquired facilities, or the disposal of our waste at off-site locations. Environmental laws and regulations could become more stringent over time and there can be no assurance that we or our operations will not be subject to significant costs in the future. Although we have obtained indemnification for pre-existing environmental liabilities from many of the persons and entities from whom we have acquired facilities, there can be no assurance that such indemnifications will be adequate. Any such expenditures or liabilities could have a material adverse effect on our results of operations and financial condition.

If we experience problems with our trucking fleet operations, our business could be harmed.

We use a fleet of trucks to pick up and deliver vehicles to and from our auction facilities. We are subject to the risks associated with providing trucking services, including inclement weather, disruptions in the transportation infrastructure, availability and price of fuel and other liabilities arising from accidents to the extent we are not covered by insurance. In addition, our failure to pick up and deliver vehicles in a timely and accurate manner could harm our reputation and brand, which could have a material adverse effect on our business.

Our executive officers, directors and their affiliates hold a large percentage of our stock and their interests may differ from other shareholders.

Our executive officers, directors and their affiliates beneficially own, in the aggregate, approximately 24% of our common stock. If they were to act together, these shareholders would have significant influence over most matters requiring approval by shareholders, including the election of directors, any amendments to our articles of incorporation and certain significant corporate transactions. In addition, without the consent of these shareholders, we could be delayed or prevented from entering into transactions that could be beneficial to us or our other investors. These shareholders may take these actions even if they are opposed by our other investors.

If we lose key management or are unable to attract and retain the talent required for our business, we may not be able to successfully manage our business or achieve our objectives.

Our future success depends in large part upon the leadership and performance of our executive management team, all of whom are employed on an at-will basis and none of whom are subject to any agreements not to compete. If we lose the service of one or more of our executive officers or key employees, in particular Willis J. Johnson, our Chief Executive Officer, and A. Jayson Adair, our President, or if one or more of them decides to join a competitor or otherwise compete directly or indirectly with us, we may not be able to successfully manage our business or achieve our business objectives.

Our corporate headquarters are located in Benicia, California. This facility consists of 29,200 square feet of office space and is under a lease that expires in April 2005. We have entered into an agreement to purchase a 100,000 square foot office building located in Fairfield, California to replace our existing corporate headquarters in fiscal 2003. We also own or lease an additional 97 facilities consisting of an aggregate of approximately 2,844 acres located in California, Texas, Arkansas, Oklahoma, Kansas, Washington, Oregon, Georgia, Missouri, New York, Connecticut, Florida, Pennsylvania, New Jersey, Massachusetts, Maryland, Ohio, Illinois, Minnesota, Wisconsin, Mississippi, North Carolina, Indiana, Arizona, Louisiana, Utah, Nevada, Alabama, South Carolina, Iowa, Michigan, Tennessee, Virginia, Colorado, Idaho, New Mexico, Kentucky, Delaware, Maine and West Virginia. We believe that our existing facilities are adequate to meet current requirements and that suitable additional or substitute space will be available as needed to accommodate any expansion of operations and additional offices.

We did not submit any matters to a vote of our shareholders during the fourth quarter of our 2002 fiscal year.

Name	Age	Position
Willis J. Johnson	55	Chief Executive Officer and Director
A. Jayson Adair	33	President and Director
Wayne R. Hilty	46	Senior Vice President and Chief Financial Officer
James E. Meeks	53	Executive Vice President, Chief Operating Officer and Director
Vincent W. Mitz	40	Senior Vice President, Marketing
Paul A. Styer	46	Senior Vice President, General Counsel and Secretary

Willis J. Johnson, our co-founder, has served as our Chief Executive Officer since 1986, and has been a board of directors member since 1982. Mr. Johnson served as our President from 1986 until May 1995. Mr. Johnson was an officer and director of U-Pull-It, Inc. ("UPI"), a self-service auto dismantler which he co-founded in 1982, from 1982 through September 1994. Mr. Johnson sold his entire interest in UPI in September 1994. Mr. Johnson has over 30 years of experience in owning and operating auto dismantling companies.

A. Jayson Adair has served as our President since November 1996 and as a director since September 1992. From April 1995 until October 1996, Mr. Adair served as our Executive Vice President. From August 1990 until April 1995, Mr. Adair served as our Vice President of Sales and Operations and from June 1989 to August 1990, Mr. Adair served as our Manager of Operations.

Wayne R. Hilty has served as our Senior Vice President and Chief Financial Officer since January 1998. Mr. Hilty served as our Vice-President and Controller from January 1997 until January 1998, and previously was an independent consultant to us. Mr. Hilty received a B.S. from San Francisco State University in 1980 and became a certified public accountant in 1983 with Arthur Young and Company.

James E. Meeks has served as our Vice President and Chief Operating Officer since September 1992 when he joined us concurrent with our purchase of South Bay Salvage Pool (the "San Martin Operation"). Mr. Meeks has served as our Executive Vice President and director since October 1996 and as Senior Vice President since April 1995. From April 1986 to September 1992, Mr. Meeks, together with his family, owned and operated the San Martin Operation. Mr. Meeks was also an officer, director and part owner of Cas & Meeks, Inc., a towing and subhauling service company, which he operated from 1991 to March 2001. Mr. Meeks has over 35 years of experience in the vehicle dismantling business.

Vincent W. Mitz has served as our Senior Vice President of Marketing since May 1995. Prior thereto, Mr. Mitz was employed by NER Auction Systems since 1981, where he held numerous positions culminating as Vice President of Sales and Operations for NER's New York region from 1990 to 1993 and Vice President of Sales & Marketing from 1993 to 1995.

Paul A. Styer has served as our General Counsel since September 1992, served as our Senior Vice President since April 1995 and as our Vice President from September 1992 until April 1995. Mr. Styer served as our director from September 1992 until October 1993. Mr. Styer has served as our Secretary since October 1993. From August 1990 to September 1992, Mr. Styer conducted an independent law practice. Mr. Styer received a B.A. from the University of California, Davis and a J.D. from the University of the Pacific. Mr. Styer is a member of the California State Bar Association.

Our executive officers are elected by our board of directors and serve at the discretion of the board. There are no family relationships among any of our directors or executive officers, except that A. Jayson Adair is the son-in-law of Willis J. Johnson.

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

The following table summarizes the high and low sales prices per share of our common stock for each quarter during the last two fiscal years. As of July 31, 2002, there were 92,239,859 shares outstanding. Our common stock has been quoted on the Nasdaq National Market under the symbol "CPRT" since March 17, 1994. As of July 31, 2002, we had 1,415 shareholders of record.

2002	High	Low
Fourth Quarter	17.80	11.73
Third Quarter	24.20	14.62
Second Quarter	25.83	19.37
First Quarter	23.67	14.51

2001	High	Low
Fourth Quarter	20.67	14.30
Third Quarter	16.08	11.67
Second Quarter	14.92	9.63
First Quarter	11.50	8.00

We have not paid a cash dividend since becoming a public company in 1994. We currently intend to retain any earnings for use in our business and do not anticipate paying any cash dividends in the foreseeable future.

In connection with the acquisition of the assets of Sadisco of Georgia, Inc. on August 31, 2001, we issued 262,632 shares of common stock. The shares were issued in reliance on the exemption from the registration requirements of the Securities Act of 1933, following a fairness hearing conducted before the California Department of Corporations.

In connection with the acquisition of the assets of Vehicle Auction Systems and Transport, Inc. on August 29, 2001, we issued 243,013 shares of common stock. The shares were issued in reliance on the exemption from the registration requirements of the Securities Act of 1933, following a fairness hearing conducted before the California Department of Corporations.

In connection with the acquisition of land on December 27, 2001, we issued 94,962 shares of common stock. The shares were issued in reliance on the exemption from the registration requirements of the Securities Act of 1933, following a fairness hearing conducted before the California Department of Corporations.

In connection with the acquisition of the assets of North Texas Insurance Auction, L.P. on June 5, 2002, we issued 361,107 shares of common stock. The shares were issued in reliance on the exemption from the registration requirements of the Securities Act of 1933, following a fairness hearing conducted before the California Department of Corporations.

In connection with the acquisition by merger of Picol, Inc. dba Mason-Dixon Auto Auction and acquisition of real property from FDV Real Estate on June 28, 2002, we issued 684,235 shares of common stock. The shares were issued in reliance on the exemption from the registration requirements of the Securities Act of 1933, following a fairness hearing conducted before the California Department of Corporations.

The table below summarizes our Selected Consolidated Financial Data as of and for each of the last five fiscal years. This selected financial information should be read in conjunction with our Consolidated Financial Statements and Notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this report. The selected operating and balance sheet data presented below have been derived from our consolidated financial statements that have been audited by KPMG LLP, independent certified public accountants, whose report is included herein covering the consolidated financial statements as of July 31, 2002 and 2001 and for each of the years in the three-year period ended July 31, 2002. The selected operating data for the years ended July 31, 1999 and 1998 and the balance sheet data as of July 31, 2000, 1999 and 1998 are derived from audited consolidated financial statements not included herein:

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

We process salvage vehicles principally on a consignment method, on either the Percentage Incentive Program ("PIP") or on a fixed fee consignment basis. Using either consignment method, only the fees associated with vehicle processing are recorded in revenue.

For the fiscal years ended July 31, 2002, 2001 and 2000, approximately 67%, 62% and 55% of the vehicles we sold, respectively, were processed under PIP. The increase in the percentage of vehicles sold under PIP in fiscal 2002 is due principally to our marketing efforts. We attempt to convert vehicle supplier agreements at acquired operations to PIP, which typically results in higher net returns to vehicle suppliers and higher fees to us than standard fixed fee consignment programs.

For the fiscal years ended July 31, 2002, 2001 and 2000, approximately 33%, 38% and 44% of the vehicles we sold, respectively, were processed under fixed fee agreements. The decline in the percentage of vehicles under fixed contracts is the direct result of our marketing efforts to convert contracts from fixed fee to PIP.

Additionally, for the fiscal year ended July 31, 2000, approximately 1% of the vehicles sold by us were processed pursuant to purchase contracts, under which we record the gross proceeds of the vehicle sale in purchased vehicle revenues and the cost of the vehicle in yard and fleet expenses.

Due to a number of factors, including the timing and size of new acquisitions, market conditions, and acceptance of PIP by vehicle suppliers, the percentage of vehicles processed under these programs in future periods may vary.

Our revenues consist of salvage fees charged to vehicle suppliers and vehicle buyers, transportation revenue and purchased vehicle revenues. Salvage fees from vehicle suppliers include fees under PIP agreements and fixed fee programs where we charge for title processing, special preparation, storage and auctioning. Salvage fees also include fees charged to vehicle buyers for purchasing vehicles, storage and annual registration. Transportation revenue includes charges to suppliers for towing vehicles under fixed fee contracts. Transportation revenue also includes towing charges assessed to buyers for delivering vehicles. Purchased vehicle revenues are comprised of the price that buyers paid at our auctions for vehicles processed that we own.

Costs attributable to yard and fleet expenses consist primarily of operating personnel (which includes yard management, clerical and yard employees), rent, contract vehicle towing, insurance, fuel, fleet maintenance and repair, and acquisition costs of vehicles we sold under Purchase Programs. Costs associated with general and administrative expenses consist primarily of executive, accounting and data processing, sales personnel, professional fees and marketing expenses.

The period-to-period comparability of our operating results and financial condition is substantially affected by business acquisitions and new openings made by us during such periods.

We have experienced significant growth as we have acquired seventeen vehicle auction facilities and established twelve new facilities since the beginning of fiscal 2000. All of these acquisitions have been accounted for using the purchase method of accounting.

As part of our overall expansion strategy of offering integrated service to vehicle suppliers, we anticipate acquiring and developing facilities in new regions, as well as the regions currently served by our facilities. As part of this strategy, in fiscal 2002, we have acquired new facilities in or near New Castle, Delaware; Savannah, Georgia; Tifton, Georgia; Charleston, West Virginia; Haslet, Texas and Greencastle, Pennsylvania and opened new facilities in or near Lyman, Maine; Tucson, Arizona; Somerville, New Jersey and Amarillo, Texas. In fiscal 2001, we acquired facilities in or near Chatham, Virginia; Shreveport, Louisiana and Mount Morris, Pennsylvania and opened new facilities in or near Harrisburg, Pennsylvania; Chicago Heights, Illinois; Martinez, California; Lawrenceburg, Kentucky and New Orleans, Louisiana. In fiscal 2000, we acquired facilities in or near Chesapeake, Virginia; Peoria, Illinois; North Boston, Massachusetts; Boise, Idaho; Pasco, Washington; Abilene, Texas; San Antonio, Texas and Albuquerque, New Mexico and opened new facilities in Graham, Washington; Denver, Colorado and West Palm Beach, Florida. We believe that these acquisitions and openings strengthen our national coverage.

We seek to increase revenues and profitability by, among other things, (i) acquiring and developing new salvage vehicle auction facilities in key markets, (ii) pursuing national and regional vehicle supply agreements, (iii) expanding our service offerings to suppliers and buyers and (iv) developing and expanding public automobile auction facilities. In addition, we implement our pricing structure and merchandising procedures and attempt to effect cost efficiencies at each of our acquired facilities by implementing our operational procedures, integrating our management information systems and redeploying personnel, when necessary.

The preparation of consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to vehicle pooling costs, allowance for doubtful accounts, goodwill, income taxes and long-lived assets. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form

the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements:

We defer, in vehicle pooling costs, certain yard and fleet expenses of vehicles consigned to and received by us but not sold as of the balance sheet date. We quantify the deferred costs using a calculation that includes the number of vehicles at our facilities at the beginning and end of the period, the number of vehicles sold during the period and certain yard and fleet expenses of the period. The primary expenses capitalized are labor, transportation, and vehicle processing. If our estimates are incorrect then yard and fleet expenses of the current period would be over- or under-stated and the opposite under- or over-statement would occur in the future.

We maintain an allowance for doubtful accounts in order to provide for estimated losses resulting from disputed amounts billed to suppliers or buyers and the inability of our suppliers or buyers to make required payments. If billing disputes exceed expectations and/or if the financial condition of our suppliers or buyers were to deteriorate, additional allowances may be required.

We evaluate the impairment of goodwill annually at a facility level by comparing the fair value of the reporting unit to its carrying value. Under this accounting policy we have not recognized any charges for the impairment of goodwill. Future adverse changes in market conditions or poor operating results of a facility could result in losses or an inability to recover the carrying value of the investment that may not be reflected in an investment's current carrying value, thereby possibly requiring an impairment charge in the future.

We evaluate the realizability of our deferred tax assets on an ongoing basis. Generally accepted accounting principles require the assessment of the Company's performance and other relevant factors when determining the need for a valuation allowance with respect to these deferred tax assets. The Company's ability to realize deferred tax assets is dependent on its ability to generate future taxable income. Based on our historical operating earnings, we believe it is more likely than not that we will realize the benefit of the deferred tax assets recorded and, accordingly, have not established a valuation allowance. Additional timing differences, future earnings trends and/or tax strategies may occur which could warrant a need for a valuation allowance.

We are also required to estimate income tax provisions and amounts ultimately payable or recoverable in numerous jurisdictions. Such estimates involve significant interpretations of regulations and are inherently very complex. Resolution of income tax treatments in individual jurisdictions may not be known for many years after completion of any fiscal year.

We evaluate long-lived assets and certain identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the estimated undiscounted future cash flows change in the future, we may be required to reduce the carrying amount of an asset in the future.

The following table sets forth for the periods indicated below, certain information derived from our consolidated statements of income expressed as a percentage of revenues. There can be no assurance that any trend in operating results will continue in the future.

Revenues were approximately $316.5 million during fiscal 2002, an increase of approximately $62.6 million, or 25%, over fiscal 2001. The increase in revenues was due primarily to the increase in gross proceeds generated from auctioned salvage vehicles and increased buyer fees. Gross proceeds were approximately $1.2 billion during fiscal 2002, an increase of approximately $154.6 million, or 15%, over fiscal 2001.

New facilities in or near New Castle, Delaware; Savannah, Georgia; Tifton, Georgia; Charleston, West Virginia; Lyman, Maine; Tucson, Arizona; Somerville, New Jersey; Haslet, Texas; Amarillo, Texas and Greencastle, Pennsylvania contributed $11.7 million of new revenue during fiscal 2002.

Yard and fleet expenses were approximately $187.0 million during fiscal 2002, an increase of approximately $34.9 million, or 23%, over fiscal 2001. The increase in yard and fleet expenses was due principally to the cost of handling increased volume at existing operations and the costs of new facilities. Approximately $11.2 million of the increase was the result of the acquisition and opening of new facilities. Yard and fleet expenses from existing facilities grew by approximately $23.7 million, or 16%, compared to existing facility revenue growth of approximately $50.9 million, or 20%. Yard and fleet expenses decreased to 59% of revenues during fiscal 2002, as compared to 60% of revenues during fiscal 2001.

General and administrative expenses were approximately $23.3 million during fiscal 2002, an increase of approximately $3.9 million, or 20%, over fiscal 2001. This increase was due primarily to increased payroll and other operating expenses. General and administrative expenses decreased to 7% of revenues during fiscal 2002, as compared to 8% of revenues during fiscal 2001.

Depreciation and amortization expense was approximately $16.3 million during fiscal 2002, an increase of approximately $2.0 million, or 14%, over fiscal 2001. This increase was due primarily to depreciation and amortization of capital expenditures and covenants not to compete and depreciation of acquired assets resulting from the acquisition of new auction facilities. The adoption of Financial Accounting Standards Board Statement No. 142 reduced goodwill amortization expense by approximately $2.6 million for fiscal 2002. On a pro forma basis, if the Company had applied Statement No. 142 during the prior year, goodwill amortization expense in fiscal 2001 would have been reduced by approximately $2.4 million.

Total other income was approximately $3.7 million during fiscal 2002, an increase of approximately $0.8 million, or 27%, over fiscal 2001. The increase is due to interest income earned on the $126 million raised in our November 2001 follow-on offering, disposal proceeds from certain fixed assets and a decrease in total debt.

Our effective combined federal, state and local income tax rate of 39% for fiscal 2002 was lower than the combined rate of 40% for fiscal 2001, due to changes in estimated state income tax rates.

Due to the foregoing factors, we realized net income of approximately $57.4 million for fiscal 2002, compared to net income of approximately $42.7 million for fiscal 2001.

Revenues were approximately $253.9 million during fiscal 2001, an increase of approximately $63.8 million, or 34%, over fiscal 2000. The increase in revenues was due primarily to the increase in gross proceeds generated from auctioned salvage vehicles. Gross proceeds were approximately $1.1 billion during fiscal 2001, an increase of approximately $209.3 million, or 25%, over fiscal 2000.

New facilities in Harrisburg, Pennsylvania; Chicago Heights, Illinois; Chatham, Virginia; Shreveport, Louisiana; Mount Morris, Pennsylvania; Martinez, California; Lawrenceburg, Kentucky and New Orleans, Louisiana contributed $5.3 million of new revenue during fiscal 2001.

Yard and fleet expenses were approximately $152.1 million during fiscal 2001, an increase of approximately $35.4 million, or 30%, over fiscal 2000. The increase in yard and fleet expenses was due principally to the cost of handling increased volume at existing operations and the costs of new facilities. Approximately $5.8 million of the increase was the result of the acquisition and opening of new facilities. Yard and fleet expenses from existing facilities grew by approximately $29.6 million, or 25%, compared to existing facility revenue growth of approximately $58.5 million, or 31%. Yard and fleet expenses decreased to 60% of revenues during fiscal 2001, as compared to 61% of revenues during fiscal 2000.

General and administrative expenses were approximately $19.4 million during fiscal 2001, an increase of approximately $3.7 million, or 24%, over fiscal 2000. This increase was due primarily to increased payroll and other operating expenses. General and administrative expenses remained unchanged at 8% of revenues during fiscal 2001 and 2000.

Depreciation and amortization expense was approximately $14.4 million during fiscal 2001, an increase of approximately $2.9 million, or 25%, over fiscal 2000. This increase was due primarily to depreciation and amortization of capital expenditures, goodwill and covenants not to compete and depreciation of acquired assets resulting from the acquisition of new salvage auction facilities.

Total other income was approximately $2.9 million during fiscal 2001, an increase of approximately $1.2 million, or 67%, over fiscal 2000. The increase is due primarily to an insurance settlement, disposal proceeds from certain fixed assets and additional rental income.

Our effective combined federal, state and local income tax rate of 40% for fiscal 2001 was higher than our fiscal 2000 effective income tax rate of 39% due to our increase in income and the higher tax rates in jurisdictions in which we acquired new facilities.

Due to the foregoing factors, we realized net income of approximately $42.7 million for fiscal 2001, compared to net income of approximately $29.4 million for fiscal 2000.

We have financed our growth through cash generated from operations, debt financing, public offerings of common stock, and the equity issued in conjunction with certain acquisitions. Cash and cash equivalents increased by approximately $117.4 million in fiscal 2002 and increased by approximately $3.1 million in fiscal 2001. Our liquidity and capital resources have not been materially affected by inflation. During the winter months, most of our facilities process 10% to 30% more vehicles than at other times of the year. This increased seasonal volume requires the increased use of our cash to pay out advances and handling costs of the additional business.

As of July 31, 2002, we had working capital of approximately $178.9 million, including cash and cash equivalents of approximately $132.7 million. Our primary source of cash is from the collection of sellers' fees and reimbursable advances from the proceeds of auctioned salvage vehicles and from buyers' fees. We believe that we are able to process, market, sell and receive payment for processed vehicles quickly.

We believe that our currently available cash, cash generated from operations and borrowing availability under our bank credit facilities and equipment leasing lines will be sufficient to satisfy our operating and working capital requirements for at least the next 12 months. However, if we experience significant growth in the future, we may be required to raise additional cash through the issuance of new debt or additional equity.

Net cash provided by operating activities increased by $25.1 million from fiscal 2001 to $82.0 million in fiscal 2002, reflecting our increased profitability and timing of routine changes in working capital items.

Capital expenditures (excluding those associated with fixed assets attributable to acquisitions) were approximately $85.9 million, $45.9 million and $34.8 million for fiscal 2002, 2001 and 2000, respectively. Our capital expenditures have related primarily to opening and improving facilities and acquiring yard equipment.

During the fiscal year ended July 31, 2002, we used cash and common stock for the acquisition of operations in New Castle, Delaware; Savannah, Georgia; Tifton, Georgia; Charleston, West Virginia; Haslet, Texas and Greencastle, Pennsylvania. The consideration paid consisted of an aggregate cash cost of approximately $8.6 million and approximately $25.7 million in common stock. During the fiscal year ended July 31, 2001, we used cash for the acquisition of operations in Chatham, Virginia; Shreveport, Louisiana and Mount Morris, Pennsylvania, which had an aggregate cash cost of approximately $5.1 million. In addition, we issued approximately $0.9 million in value of our common stock in conjunction with the fiscal 2001 acquisitions. During the fiscal year ended July 31, 2000, we used cash for the acquisition of operations in Chesapeake, Virginia; Peoria, Illinois; North Boston, Massachusetts; Boise, Idaho; Pasco, Washington; Abilene, Texas; San Antonio, Texas and Albuquerque, New Mexico, which had an aggregate cash cost of approximately $20.4 million.

During fiscal year ended July 31, 2002, we used common stock to purchase an existing facility, which we were leasing. The consideration paid consisted of approximately $2.3 million in common stock.

In fiscal 2002, we completed a follow-on public offering of 6.9 million shares of our common stock at a price to the public of $19.33 per share, split adjusted. We sold all of the shares and the offering raised $126.1 million after underwriting discounts and offering costs.

In fiscal 2002, 2001 and 2000, we generated approximately $1.1 million, $2.3 million and $2.1 million, respectively, through the exercise of stock options.

In fiscal 2002, 2001 and 2000, we generated approximately $1.7 million, $1.4 million and $0.8 million, respectively, through the issuance of shares under the employee stock purchase program.

Noncancelable future minimum lease payments under capital and operating leases with initial or remaining lease terms in excess of one year at July 31, 2002 are as follows:

We have entered into an agreement to purchase a 100,000 square foot office building located in Fairfield, California for a purchase price of approximately $17 million. Additionally, we have entered into agreements to acquire approximately $0.8 million of additional multi-vehicle transport trucks and forklifts.

On February 23, 2001, we entered into a credit facility with our existing banking syndicate. The facility provided by Wells Fargo Bank, Fleet National Bank and U.S. Bank National Association consists of an unsecured revolving reducing line of credit in the amount of $100 million that matures in 2006. As of July 31, 2002, the Company had available $96.3 million under this facility, after taking into account $3.7 million of outstanding letters of credit. We are subject to customary covenants, including restrictions on the payments of dividends, with which we are in compliance.

As of July 31, 2002, we have agreements with certain financial institutions whereby the institutions will purchase approximately $12.9 million of yard and fleet equipment which will be leased back to us under operating leases.

In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This Statement applies to legal obligations associated with retirement of long-lived assets that result from the acquisition, construction, development or normal use of the asset. SFAS No. 143 is effective for fiscal years beginning after June 15, 2002. We will adopt the provisions of SFAS No. 143 commencing August 1, 2002 and it is not expected to have a material impact on our consolidated financial statements.

In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. While SFAS No. 144 supercedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of", it retains many of the fundamental provisions of that Statement. We will adopt the provisions of SFAS No. 144 commencing August 1, 2002 and it is not expected to have a material impact on our consolidated financial statements.

In April 2002, the FASB issued SFAS No. 145 "Recision of SFAS Nos. 4, 44 and 64, Amendment of SFAS 13, and Technical Corrections as of April 2000" (SFAS 145). SFAS revises the criteria for classifying the extinguishment of debt as extraordinary and the accounting treatment of certain lease modifications. SFAS 145 is effective for fiscal years beginning after May 15, 2002, and is not expected to have a material impact on our consolidated financial statements.

In June 2002, the FASB issued SFAS No.146, "Accounting for Costs Associated with Exit or Disposal Activities." SFAS 146 requires that a liability for a cost associated with an exit of disposal activity be recognized and measured initially at fair value only when the liability is incurred. SFAS 146 is effective for exit and discontinued activities initiated after December 31, 2002 and is not expected to have a material impact on our consolidated financial statements.

Our principal exposure to financial market risk is interest rate risk. Our exposure to market risk for changes in interest rates relates primarily to our investment portfolio of marketable securities. We do not use derivative financial instruments for speculative or trading purposes. We invest primarily in corporate securities, bank certificates, U.S. Treasury and Agency Obligations, asset-backed securities, repurchase agreements, auction rate debt instruments and money market mutual funds and generally hold them to maturity. Consequently, we do not expect any material loss with respect to our investment portfolio.

We do not use derivative financial instruments in our investment portfolio to manage interest rate risk. We do, however, limit our exposure to interest rate and credit risk by establishing and strictly monitoring clear policies and guidelines for our fixed income portfolios. At the present time, the maximum duration of all portfolios is 90 days or less. Our guidelines also establish credit quality standards, limits on exposure to any one issue as well the type of instruments. Due to the limited duration and credit risk criteria in our guidelines, we do not expect that our exposure to market and credit risk will be material.

See Part IV, Item 15(a) for an index to the financial statements and supplementary financial information, which are attached thereto.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

The information concerning the Company's directors required by this Item is incorporated herein by reference from the Company's definitive proxy statement to be filed within 120 days of the end of our fiscal year pursuant to General Instruction G(3) of Form 10-K in connection with the Company's Annual Meeting of Shareholders to be held on December 4, 2002 (the "Proxy Statement") under the heading "Election of Directors."

Information regarding executive officers is included in Item 4A, Part I hereof under the caption "Executive Officers of the Registrant."

The information regarding compliance with Section 16(a) of the Securities Exchange Act of 1934, as amended is incorporated herein by reference from the Company's Proxy Statement under the heading "Section 16(a) Beneficial Ownership Reporting Compliance."

The information required by this Item is incorporated herein by reference from the Company's Proxy Statement under the heading "Executive Compensation."

The information required by this Item is incorporated herein by reference from the Company's Proxy Statement under the heading "Security Ownership."

The information required by this Item is incorporated herein by reference from the Company's Proxy Statement under the heading "Certain Transactions."

As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended, we are in the process of developing disclosure controls and procedures (as defined in Rule 13a-14(c) under the Exchange Act). Pursuant to SEC Release No. 34-46427 (August 29, 2002), the disclosure required pursuant to Item 307(a) of Regulation S-K relating to an evaluation of disclosure controls and procedures will be contained in our Quarterly Report on Form 10-Q for the quarter ending October 31, 2002.

All other schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements or notes thereto.

No reports on Form 8-K were filed by the registrant during the fourth quarter ended July 31, 2002.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

KNOWN ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Willis J. Johnson, as his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to this Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

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

Signature	Capacity in Which Signed	Date

/S/ WILLIS J. JOHNSON Willis J. Johnson	Chief Executive Officer (Principal Executive Officer and Director)	October 16, 2002
/S/ WAYNE R. HILTY Wayne R. Hilty	Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)	October 16, 2002
/S/ A. JAYSON ADAIR A. Jayson Adair	Director	October 16, 2002
/S/ HAROLD BLUMENSTEIN Harold Blumenstein	Director	October 16, 2002
/S/ JAMES GROSFELD James Grosfeld	Director	October 16, 2002
/S/ JAMES E. MEEKS James E. Meeks	Director	October 16, 2002
/S/ MARVIN L. SCHMIDT Marvin L. Schmidt	Director	October 16, 2002
/S/ JONATHAN VANNINI Jonathan Vannini	Director	October 16, 2002

I, Willis J. Johnson, Chairman & Chief Executive Officer of Copart, Inc., certify that:

I, Wayne R. Hilty, Senior Vice President and Chief Financial Officer, certify that:

We have audited the accompanying consolidated balance sheets of Copart, Inc. and subsidiaries ("the Company") as of July 31, 2002 and 2001, and the related consolidated statements of income, shareholders' equity and cash flows for each of the years in the three-year period ended July 31, 2002. In connection with our audits of the consolidated financial statements, we also have audited the related financial statement schedule. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Copart, Inc. and subsidiaries as of July 31, 2002 and 2001, and the results of their operations and their cash flows for each of the years in the three-year period ended July 31, 2002, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

As discussed in Note 13 to the consolidated financial statements, effective August 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets."

COPART, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2002, 2001 and 2000

Copart, Inc. and its subsidiaries ("the Company") provide vehicle suppliers, primarily insurance companies, with a full range of services to process and sell salvage vehicles through auctions, principally to licensed vehicle dismantlers, rebuilders, repair licensees and used vehicle dealers.

The consolidated financial statements include the accounts of the Company's wholly-owned subsidiaries. Significant intercompany transactions and balances have been eliminated in consolidation.

Revenues, which generally consist of salvage fees charged to vehicle suppliers and buyers, are generally recorded at the date the vehicles are sold at auction. No provision for returns has been established, as all sales are final with no right of return.

The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.

Vehicle pooling costs consist of labor, towing, outside services and other costs directly attributable to the gathering and processing of vehicles prior to their sale. Vehicle pooling costs are recognized as expenses in the period the vehicle is sold at auction. The Company continually evaluates and adjusts the components of vehicle pooling costs as necessary.

Property and equipment are stated at cost less accumulated depreciation and amortization. Leasehold improvements are amortized on a straight-line basis over the shorter of the lease terms or the useful lives of the respective assets.

Depreciation is computed on a straight-line basis over the estimated useful lives of: 3 to 7 years for transportation and other equipment; 5 to 10 years for office furniture and equipment; and 15 to 40 years or life of lease, whichever is shorter, for buildings and leasehold improvements.

Intangible assets consist primarily of covenants not to compete and options to purchase leased property. Amortization, except for the options to purchase leased property, is provided on the straight-line basis over the estimated lives, which range from 5 to 7 years.

The amounts recorded for financial instruments in the Company's consolidated financial statements, which include cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities and capital lease obligations approximate fair value as of July 31, 2002 and 2001.

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Basic net income per share amounts were computed by dividing net income by the weighted average number of common shares outstanding. Diluted net income per share amounts were computed by dividing net income by the weighted average number of common shares outstanding plus dilutive potential common shares calculated for stock options outstanding using the treasury stock method.

The Company accounts for its stock-based compensation arrangements for employees using the intrinsic-value method for stock-based awards to employees. Compensation expense is recorded for the Company's stock options on the date of grant, to the extent the fair value of the underlying common stock exceeds the exercise price for stock options or the purchase price for common stock. Options granted to consultants and other non-employees are accounted for at fair value.

The Company has no items of other comprehensive income in any period presented. Therefore, net income as presented in the Consolidated Statements of Income equals comprehensive income.

All of the Company's facilities are aggregated into one reportable segment given the similarities of economic characteristics between the operations represented by the facilities and the common nature of the products, customers and methods of revenue generation.

Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from those estimates.

On August 1, 2001, the Company adopted Financial Accounting Standards Board ("FASB") Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires that the purchase method of accounting be used for all business combinations and that certain acquired intangible assets be recognized as assets apart from goodwill. The adoption of SFAS No. 141 had no impact on the Company's results of operations or financial position. SFAS No. 142 provides that goodwill should not be amortized but instead be tested for impairment annually at the reporting unit level (note 13).

The Company evaluates long-lived assets and certain identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the property and equipment exceeds its fair market value.

Goodwill and intangible assets not subject to amortization are tested annually for impairment. An impairment loss is recognized to the extent that the carrying amount exceeds the asset's fair value.

Certain reclassifications have been made to prior years' financial statements to conform to the classifications used in 2002.

During fiscal 2002 the Company made the following six acquisitions: Delaware Public Auto Auction, of New Castle, Delaware; Sadisco, of Savannah, Georgia; Sadisco of Tifton, Georgia; Capital Auto Salvage, of Charleston, West Virginia; North Texas Insurance Auto Auction, L.P., of Haslet, Texas and Mason-Dixon Auto Auction, of Greencastle, PA. The consideration paid for these acquisitions consisted of $8,561,100 in cash and 1,550,987 shares of common stock valued at approximately $25,691,900. The acquired net assets consisted of accounts and advances receivable, inventory, fixed assets, land, buildings, goodwill, 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 new facilities contributed $11.6 million of revenues during fiscal 2002. The excess of the purchase price over the fair market value of the net identifiable assets acquired of $20,166,700 has been recorded as goodwill. The Company estimates $16,566,700 of the total goodwill balance relating to these acquisitions will be deductible for tax purposes. In addition, the Company paid $2,100,000 for covenants not to compete relating to these acquisitions, which are being amortized over five to seven years, based upon the agreements. In conjunction with the New Castle, Delaware; Savannah, Georgia; Tifton, Georgia; Charleston, West Virginia and Haslet, Texas acquisitions, the Company entered into leases for the use of these facilities.

During fiscal 2001 the Company made the following three acquisitions: Auto Salvage Disposal, Inc., of Chatham, Virginia; Twin City Salvage Pool, Inc., of Shreveport, Louisiana and Mountain State Auto Auction, Inc., of Mount Morris, Pennsylvania. The consideration paid for these acquisitions consisted of $5,099,000 in cash and 65,624 shares of common stock valued at approximately $862,700. The acquired net assets consisted of accounts and advances receivable, inventory, fixed assets, goodwill, 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 new facilities contributed $1.9 million of revenues during fiscal 2001. The excess of the purchase price over fair market value of the net identifiable assets acquired of $3,505,700 has been recorded as goodwill. In addition, the Company paid $150,000 for covenants not to compete relating to these acquisitions, which are being amortized over the life of these agreements. In conjunction with the Chatham, Virginia; Shreveport, Louisiana and Mount Morris, Pennsylvania acquisitions, the Company entered into leases for the use of these facilities.

During fiscal 2000 the Company made the following eight acquisitions: Buchanan Auto & Auction, of Chesapeake, Virginia; Pekin Auto Storage Pool, Ltd., of Peoria, Illinois; Ronnie's Auto Auction, Inc., of North Boston, Massachusetts; Idaho Insurance Auto Pools, Inc., of Boise, Idaho; DAA's Northwest Salvage Auction, of Pasco, Washington; Brokaw's, of Abilene, Texas; Texas Alamo Salvage Pool, Inc., of San Antonio, Texas and New Mexico Salvage Pool, of Albuquerque, New Mexico. The consideration paid for these acquisitions consisted of $20,426,000 in cash. The acquired net assets consisted of accounts and advances receivable, inventory, fixed assets, goodwill, 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 new facilities contributed $6.4 million of revenues during fiscal 2000. The excess of the purchase price over fair market value of the net identifiable assets acquired of $11,751,900 has been recorded as goodwill. In addition, the Company paid $4,466,000 for covenants not to compete relating to these acquisitions, which are being amortized over the life of these agreements. In conjunction with the Chesapeake, Virginia; Peoria, Illinois; North Boston, Massachusetts; Boise, Idaho; Pasco, Washington and Albuquerque, New Mexico acquisitions, the Company entered into leases for the use of these facilities.

Pro forma financial information for these acquisitions does not result in a significant change from actual results for 2002 and 2001.

July 31,	2002	2001
Advance charges receivable	$43,067,600	$42,768,900
Trade accounts receivable	18,628,800	19,624,700
Other receivables	3,578,700	4,157,900

	65,275,100	66,551,500
Less allowance for doubtful accounts	1,203,200	1,644,200

	$64,071,900	$64,907,300

Advance charges receivable represents amounts paid to third parties on behalf of insurance companies for which the Company will be reimbursed when the vehicle is sold. Trade accounts receivable includes fees and gross proceeds to be collected from insurance companies and buyers.

July 31,	2002		2001
Transportation and other equipment	$	13,042,700	$	11,625,300
Office furniture and equipment		30,294,200		22,369,300
Land		77,967,700		39,890,900
Buildings and leasehold improvements		124,238,400		75,311,100

		245,543,000		149,196,600
Less accumulated depreciation and amortization		47,774,300		34,199,000

	$	197,768,700	$	114,997,600

Included in property and equipment as of July 31, 2002 and 2001 are $994,500 and $1,231,800, respectively, of equipment under capital leases. Accumulated amortization related to this equipment was $397,800 and $355,900 as of July 31, 2002 and 2001, respectively.

July 31,	2002		2001
Covenants not to compete	$	10,861,000	$	8,461,000
Options to purchase leased property		3,455,000		3,455,000
Other		284,000		284,000

		14,600,000		12,200,000
Less accumulated amortization		5,433,600		3,835,300

	$	9,166,400	$	8,364,700

July 31,	2002		2001
Trade accounts payable	$	4,730,500	$	2,968,400
Accounts payable to insurance companies		13,549,500		15,429,700
Accrued insurance		3,967,100		1,578,800
Accrued compensation and benefits		8,552,000		5,918,800
Other accrued liabilities		1,094,300		874,100

	$	31,893,400	$	26,769,800

July 31,	2002		2001
Notes payable under capital leases, secured by equipment, payable in monthly installments of $4,600 to $24,000 through October 2003, bearing interest at 6.9% per annum		409,200		712,100

		409,200		712,100
Less current portion		324,500		302,900

	$	84,700	$	409,200

On February 23, 2001, the Company entered into a credit facility with our existing banking syndicate. The facility provided by Wells Fargo Bank, Fleet National Bank and U.S. Bank National Association consists of an unsecured revolving reducing line of credit in the amount of $100 million that matures in 2006. As of July 31, 2002, the

Company had available $96.3 million under this facility, after taking into account $3.7 million of outstanding letters of credit. The Company is subject to customary covenants, including restrictions on the payments of dividends, with which the Company is in compliance.

In fiscal 2002, the Company declared a three-for-two forward common stock split. The accompanying consolidated financial statements have been restated to reflect the stock split.

In fiscal 2002, the Company completed a follow-on public offering of 6.9 million shares of common stock at a price to the public of $19.33 per share. The Company sold all of the shares and the offering raised $126.1 million after underwriting discounts and offering costs.

In December 2001, the Company adopted the Copart, Inc. 2001 Stock Option Plan (the "Plan"), presently covering an aggregate of 4,500,000 shares of the Company's Common Stock. The Plan provides for the grant of incentive stock options to employees and non-qualified stock options to employees, officers, directors and consultants at prices not less than 100% and 85% of the fair market value for incentive and non-qualified stock options, respectively, 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 two or five year period. The Plan replaces the Company's 1992 Stock Option Plan (the "1992 Plan") which expired in August 2002.

In March 1994, the Company adopted the Copart, Inc. 1994 Director Option Plan under which an aggregate of 240,000 shares of the Company's common stock are presently reserved. In general, new non-employee directors will automatically receive grants of non-qualified stock options to purchase 18,000 shares and subsequent grants to purchase 9,000 additional shares upon election and each subsequent re-election to the Company's board of directors, respectively.

The Company has authorized the issuance of 5,000,000 shares of preferred stock, no par value, none of which are issued or outstanding at July 31, 2002.

The Copart, Inc. Employee Stock Purchase Plan (the "ESPP") provides for the purchase of up to an aggregate of 1,500,000 shares of Common Stock of the Company by employees pursuant to the terms of the ESPP. The number of shares of Common Stock issued pursuant to the ESPP during each of fiscal 2002, 2001 and 2000 was 117,033, 141,331 and 110,289, respectively.

Pro forma information regarding net income and net income per share is required by SFAS No. 123, and has been determined as if the Company had accounted for options granted under its plans using the fair value method. For these purposes, the fair value of options issued under the Plans was estimated at the date of grant using a Black-Scholes option pricing model with the following assumptions: no dividend yield, volatility factor of the expected market price of the Company's stock of 0.60, a forfeiture rate of 0.06, a weighted-average expected life of the options of five years and a risk-free interest rate of 5.5%, 5.8% and 6.0% for 2002, 2001 and 2000, respectively. The weighted average fair value of options granted were $9.36, $12.16 and $8.62, for 2002, 2001 and 2000, respectively. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options

vesting period. The effects of applying SFAS No. 123 in this pro forma disclosure are not indicative of future results. The Company's pro forma net income and net income per common share would approximate the following:

		As Reported		Pro Forma
Fiscal Year Ended July 31, 2002:
	Net income	$	57,389,200	$	54,375,300

	Basic net income per share	$	.65	$	.61

	Diluted net income per share	$	.63	$	.60

Fiscal Year Ended July 31, 2001:
	Net income	$	42,685,000	$	40,043,000

	Basic net income per share	$	.52	$	.49

	Diluted net income per share	$	.50	$	.47

Fiscal Year Ended July 31, 2000:
	Net income	$	29,429,100	$	28,090,400

	Basic net income per share	$	.36	$	.35

	Diluted net income per share	$	.35	$	.34

A summary of stock option activity for the fiscal years ended July 31, 2002, 2001 and 2000 follows:

The reconciliation between the amount computed by applying the U.S. federal statutory tax rate of 35% to income before income taxes and the actual income tax expense follows:

	2002		2001		2000
Income tax expense at statutory rate	35	%	35	%	35	%
State income taxes, net of federal income tax benefit	4		4		4
Amortization of goodwill	—		2		2
Other differences	—		(1	)	(2	)

	39	%	40	%	39	%

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below:

July 31,			2002			2001
Deferred tax assets:
	Allowance for doubtful accounts receivable		$	539,700		$	709,500
	Accrued vacation			899,100			724,000
	State taxes			1,618,700			1,221,400
	Depreciation			3,537,000			3,593,000

		Total gross deferred tax assets		6,594,500			6,247,900

Deferred tax liabilities:
	Vehicle pooling costs			(6,704,000	)		(5,637,400	)
	Amortization of intangible assets			(4,600,100	)		(2,508,600	)

		Total gross deferred tax liabilities		(11,304,100	)		(8,146,000	)

		Net deferred tax liability	$	(4,709,600	)	$	(1,898,100	)

Based on the Company's historical operating earnings, management believes it is more likely than not that the Company will realize the benefit of the deferred tax assets recorded and, accordingly, has not established a valuation allowance.

In fiscal 2002, 2001 and 2000, the Company recognized a tax benefit of $2,817,300, $2,026,400 and $3,561,900, respectively, upon the exercise of certain stock options which is reflected in shareholders' equity.

COPART, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2002, 2001 and 2000 (Continued)

There were no adjustments to net income in calculating diluted net income per share. The table below reconciles basic weighted shares outstanding to diluted weighted average shares outstanding:

Options to purchase 1,105,500 shares of common stock at an average price of $17.31 per share were outstanding during the fiscal year ended July 31, 2002 but were not included in the computation of diluted earnings per share because the options' exercise price was greater than the average market price of the common shares. No options were anti-dilutive for fiscal year 2001 and 2000.

In fiscal 2002, two customers accounted for 14% and 9% of the Company's revenue, respectively. In fiscal 2001, these two customers accounted for 13% and 9%, and in fiscal 2000, they accounted for 15% and 12% of the Company's revenue, respectively. At July 31, 2002 these two customers accounted for 13% and 7% of accounts receivable, respectively. At July 31, 2001 they accounted for 10% and 6%, and at July 31, 2000 they accounted for 8% and 6% of accounts receivable, respectively. No other customer accounted for more than 4% of revenues.

The Company leases certain facilities under operating leases and in some cases has either a right of first refusal to acquire or option to purchase certain facilities at fair value. Facilities rental expense for the fiscal years ended July 31, 2002, 2001 and 2000 aggregated, $14,084,000, $11,987,000 and $9,866,000, respectively.

As of July 31, 2002, the Company has agreements with certain financial institutions whereby the institutions will purchase approximately $12,850,000 of yard and fleet equipment which will be leased back to the Company under operating leases. Yard and fleet equipment rental expense for the fiscal years ended July 31, 2002, 2001 and 2000 aggregated approximately, $8,597,000, $7,000,000 and $5,200,000, respectively.

Noncancelable future minimum lease payments under capital and operating leases with initial or remaining lease terms in excess of one year at July 31, 2002 are as follows:

Fiscal years ending July 31,	Capital Leases		Operating Leases
2003	$	342,600	$	24,991,900
2004		85,700		22,847,600
2005		—		19,145,800
2006		—		13,797,700
2007		—		9,667,500
Thereafter		—		36,306,700

		428,300	$	126,757,200

Less amount representing interest		19,100

	$	409,200

The Company has entered into an agreement to purchase a 100,000 square foot office building located in Fairfield, California for a purchase price of approximately $17 million, to replace its current corporate headquarters. The Company also entered into a sublease of its existing corporate building, which is under lease through April 2005. Additionally, the Company has entered into agreements to acquire approximately $800,000 of multi-vehicle transport trucks and forklifts.

The Company had outstanding letters of credit of $3.7 million at July 31, 2002. These letters of credit secure certain insurance obligations.

The Company is involved in litigation and damage claims arising in the ordinary course of business, such as actions related to injuries, property damage or handling or disposal of vehicles. Among this litigation are lawsuits filed in California against the Company and rental car company vehicle suppliers which purport to be class actions on behalf of California residents who own previously damaged rental car vehicles that were sold through Copart's auctions on clean titles, which plaintiffs contend should have been sold on salvage certificates. The Company is also involved in various governmental and administrative proceedings primarily relating to licensing and operation of our business. The Company provides for costs relating to these matters when a loss is probable and the amount may be reasonably estimated. The effect of the outcome of these matters on the Company's future results of operations cannot be predicted because any such effect depends on future results of operations and the amount of timing of the resolution of such matters. While it is not feasible to determine the outcome of these matters, management believes that any ultimate liability will not have a material effect on the Company's financial position, results of operations or cash flows of the Company.

On August 1, 2001, the Company adopted SFAS No. 141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires that the purchase method of accounting be used for all business combinations and that certain acquired intangible assets be recognized as assets apart from goodwill. SFAS No. 142 provides that goodwill should not be amortized but instead be tested for impairment annually at the reporting unit level.

In accordance with SFAS No. 142, the Company completed the transitional impairment test of goodwill during the second quarter of fiscal 2002. That effort, and the Company's assessment of identifiable intangible assets, indicated no adjustment was required upon adoption of this pronouncement. The impairment testing is performed in two steps: (i) the determination of impairment, based upon the fair value of a reporting unit as compared to its carrying value, and (ii) if there is an impairment, this step measures the amount of impairment loss by comparing the implied fair value of goodwill with the carrying amount of that goodwill. The Company's annual impairment test was performed in the fourth quarter of fiscal 2002. The results of this test indicated that goodwill was not impaired.

Fiscal years ending July 31,		2002			2001
Amortized intangibles:
	Covenants not to compete	$	10,861,000		$	8,461,000
	Accumulated amortization		(5,150,300	)		(3,582,000	)

Net intangibles		$	5,710,700		$	4,879,000

Aggregate amortization expense on intangible assets was approximately $1,598,400 and $1,436,800 for the fiscal years ended July 31, 2002 and 2001, respectively. Estimated amortization expense for each of the five succeeding fiscal years is as follows:

The change in the carrying amount of goodwill for the twelve months ended July 31, 2002 is as follows:

Balance as of August 1, 2001	$	82,753,400
Goodwill acquired during the period		20,166,700
Impairment adjustment		—

Balance as of July 31, 2002	$	102,920,100

The following table reflects the consolidated results adjusted as though the adoption of SFAS No. 142 occurred at the beginning of fiscal 2000:

The Company leases certain of its facilities from affiliates of the Company under various lease agreements. Rental payments under these leases aggregated $533,800, $681,500 and $587,300 for the fiscal years ended July 31, 2002, 2001 and 2000, respectively, and expire on various dates through 2005.

An affiliate provided $413,100 and $614,300 of tow services to the Company in fiscal 2001 and 2000, respectively.

In fiscal 2002, the Company acquired $18,487,000 of intangible assets and $9,505,900 of tangible assets through the issuance of common stock in conjunction with the New Castle, Delaware; Savannah, Georgia; Tifton, Georgia; Haslet, Texas and Greencastle, Pennsylvania acquisitions and purchase of land at the Baton Rouge, Louisiana location. In fiscal 2002, the Company received 21,670 shares of common stock as payment for the exercise of 148,000 shares of common stock under the 1992 Stock Option Plan. The Company retired these shares upon receipt. In fiscal 2001, the Company acquired $774,600 of intangible assets and $88,100 of tangible assets through the issuance of common stock in conjunction with the Shreveport, Louisiana acquisition.

COPART, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts
Fiscal years ended July 31, 2002, 2001 and 2000

			Page
Information concerning forward-looking statements used in this report			3
PART I
	Item 1 —	Business	3
		General	3
		Industry Overview	4
		Operating and Growth Strategy	5
		Our Competitive Advantages	7
		Our Service Offerings	8
		Supply Arrangements and Supplier Marketing	10
		Buyers	10
		Competition	10
		Management Information Systems	11
		Employees	11
		Environmental Matters	11
		Governmental Regulations	12
		Legal Proceedings	12
		Factors That May Affect Future Results	12
	Item 2 —	Properties	16
	Item 3 —	Legal Proceedings	16
	Item 4 —	Submission of Matters to a Vote of Security Holders	16
	Item 4A —	Executive Officers of the Registrant	17
PART II
	Item 5 —	Market For Registrant's Common Equity and Related Shareholder Matters	18
	Item 6 —	Selected Financial Data	19
	Item 7 —	Management's Discussion and Analysis of Financial Condition and Results of Operations	19
	Item 7A —	Quantitative and Qualitative Disclosures About Market Risk	26
	Item 8 —	Financial Statements and Supplementary Data	26
	Item 9 —	Changes in and Disagreements with Accountants on Accounting And Financial Disclosure	26
Part III
	Item 10 —	Directors and Executive Officers of the Registrant	27
	Item 11 —	Executive Compensation	27
	Item 12 —	Security Ownership of Certain Beneficial Owners and Management	27
	Item 13 —	Certain Relationships and Related Transactions	27
	Item 14 —	Controls and Procedures	27
Part IV
	Item 15 —	Exhibits, Financial Statement Schedules and Reports on Form 8-K	28

		2002		2001		2000		1999		1998
Selected Operating Data
Revenues		$	316,456	$	253,889	$	190,042	$	141,751	$	114,206
Operating income			89,940		68,117		46,216		33,386		23,508
Income before income taxes			93,658		71,044		47,974		35,123		24,945
Net income			57,389		42,685		29,429		21,966		15,216
Basic per share amounts:
	Net income		0.65		0.52		0.36		0.27		0.19
	Weighted average shares		88,718		82,340		80,851		80,063		79,088
Diluted per share amounts:
	Net income		0.63		0.50		0.35		0.27		0.19
	Weighted average shares		91,251		84,614		83,710		82,707		80,697
Balance Sheet Data
Cash, cash equivalents and short-term investments		$	132,690	$	15,245	$	12,165	$	37,048	$	28,796
Working capital			178,946		63,774		54,042		64,647		54,829
Total assets			535,848		315,064		262,324		218,677		190,942
Total debt			409		712		8,555		7,820		8,425
Shareholders' equity			486,217		269,152		219,890		183,982		160,183
Other Data
Gross proceeds (000's)		$	1,208,800	$	1,054,169	$	844,899	$	641,472	$	534,818
Number of auction facilities			94		84		76		65		60

			2002		2001		2000
Revenues			100.0	%	100.0	%	100.0	%

Operating expenses:
	Yard and fleet		59.1		59.9		61.4
	General and administrative		7.3		7.6		8.2
	Depreciation and amortization		5.2		5.7		6.0

		Total operating expenses	71.6		73.2		75.6

Operating income			28.4		26.8		24.4
Other income, net			1.2		1.2		0.9

Income before income taxes			29.6		28.0		25.3
Income taxes			11.5		11.2		9.8

Net income			18.1	%	16.8	%	15.5	%

3.1		Amended and Restated Articles of Incorporation of the Registrant (4)
3.1b		Certificate of Amendment of Articles of Incorporation (4)
3.2		Bylaws of the Registrant, as amended (3)
10.1*		Copart, Inc. 1992 Stock Option Plan, as amended (2)
10.2*		1994 Employee Stock Purchase Plan, with form of Subscription Agreement (2)
10.3*		1994 Director Option Plan, with form of Subscription Agreement (1)
10.4*		Copart, Inc. 2001 Stock Option Plan (6)
10.5		Form of Indemnification Agreement, signed by Executive Officers and Directors and the Company
10.6		General lease dated as of December 29, 1997 between Robert Arthur Gomes and Robert Paul Gomes and Copart of Connecticut, Inc.
10.7		Standard Industrial/Commercial single-tenant lease- net dated as of December 23, 1998 between Wickland Oil Martinez and Copart, Inc.
10.8		Lease agreement dated as of September 14, 2001 between Woodmich L.L.C. and Copart, Inc.
10.9		Office lease dated as of November 2001 between Green Valley Building 12 LLC and Copart, Inc.
10.10		Aircraft lease dated as of April 11, 2002 between Fleet Capital Corporation and Copart, Inc.
10.12		Credit Agreement among Copart, Inc. and Wells Fargo Bank, National Association, U.S. Bank, National Association and Fleet National Bank and Wells Fargo Bank, National Association, as Administrative Agent and Lead Arranger and Fleet National Bank, as Syndication Agent, dated February 23, 2001 (5)
23.1		Consent of KPMG LLP (see page 51)
24.1		Power of Attorney (included on page 30)
99.1		Certification of Willis J. Johnson, Chief Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.2		Certification of Wayne R. Hilty, Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

			July 31, 2002		July 31, 2001
ASSETS
Current assets:
	Cash and cash equivalents		$	132,690,000	$	15,245,200
	Accounts receivable, net			64,071,900		64,907,300
	Vehicle pooling costs			20,014,500		19,845,400
	Prepaid expenses and other assets			9,216,000		7,866,200

		Total current assets		225,992,400		107,864,100
Deferred income taxes				—		1,084,400
Property and equipment, net				197,768,700		114,997,600
Intangibles and other assets, net				9,166,400		8,364,700
Goodwill				102,920,100		82,753,400

		Total assets	$	535,847,600	$	315,064,200

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
	Current portion of long-term debt		$	324,500	$	302,900
	Accounts payable and accrued liabilities			31,893,400		26,769,800
	Deferred revenue			8,352,000		8,863,100
	Income taxes payable			2,632,000		4,975,500
	Deferred income taxes			3,646,500		2,982,500
	Other current liabilities			198,000		196,500

		Total current liabilities		47,046,400		44,090,300
Deferred income taxes				1,063,100		—
Long-term debt, less current portion				84,700		409,200
Other liabilities				1,436,400		1,412,300

		Total liabilities		49,630,600		45,911,800

Commitments and contingencies
Shareholders' equity:
	Common stock, no par value—180,000,000 shares authorized; 92,239,859 and 83,000,445 shares issued and outstanding at July 31, 2002 and 2001, respectively			287,767,400		128,092,000
	Retained earnings			198,449,600		141,060,400

		Total shareholders' equity		486,217,000		269,152,400

		Total liabilities and shareholders' equity	$	535,847,600	$	315,064,200

			Page
		The following documents are filed as part of this report:
(a)	1.	Index to Consolidated Financial Statements
		Independent Auditors' Report	33
		Consolidated Balance Sheets at July 31, 2002 and 2001	34
		Consolidated Statements of Income for the three years ended July 31, 2002	35
		Consolidated Statements of Shareholders' Equity for the three years ended July 31, 2002	36
		Consolidated Statements of Cash Flows for the three years ended July 31, 2002	37
		Notes to Consolidated Financial Statements	38
	2.	Consolidated Financial Statement Schedule II
		Valuation and Qualifying Accounts	50

	Registrant
	COPART, INC.
October 16, 2002	By:	/S/ WILLIS J. JOHNSON Willis J. Johnson Chief Executive Officer

		Common Stock
		Outstanding shares	Amount		Retained Earnings		Shareholders' Equity
Balances at July 31, 1999		80,535,345	$	115,036,100	$	68,946,300	$	183,982,400
	Exercise of stock options and related tax benefit	1,184,007		5,657,300		—		5,657,300
	Shares issued for Employee Stock Purchase Plan	110,289		821,600		—		821,600
	Net Income	—		—		29,429,100		29,429,100

Balances at July 31, 2000		81,829,641		121,515,000		98,375,400		219,890,400
	Shares issued for acquisition	65,624		862,700		—		862,700
	Exercise of stock options and related tax benefit	963,849		4,329,700		—		4,329,700
	Shares issued for Employee Stock Purchase Plan	141,331		1,384,600		—		1,384,600
	Net Income	—		—		42,685,000		42,685,000

Balances at July 31, 2001		83,000,445		128,092,000		141,060,400		269,152,400
	Shares issued for acquisitions	1,550,987		25,691,900		—		25,691,900
	Shares issued in connection with public offering	6,900,000		126,068,600		—		126,068,600
	Shares issued for land purchase	94,962		2,300,000		—		2,300,000
	Exercise of stock options and related tax benefit, net of repurchased shares	576,432		3,878,600		—		3,878,600
	Shares issued for Employee Stock Purchase Plan	117,033		1,736,300		—		1,736,300
	Net Income	—		—		57,389,200		57,389,200

Balances at July 31, 2002		92,239,859	$	287,767,400	$	198,449,600	$	486,217,000

	2002				2001				2000
	Shares		Weighted- Average Exercise Price		Shares		Weighted- Average Exercise Price		Shares		Weighted- Average Exercise Price
Outstanding at beginning of year	5,244,549		$	7.51	4,820,898		$	4.28	5,135,799		$	2.55
Granted	397,500			17.65	1,402,500			15.15	885,000			10.59
Exercised	(598,102	)		2.57	(963,849	)		2.39	(1,184,007	)		1.77
Cancelled	(76,200	)		12.16	(15,000	)		11.13	(15,894	)		2.09

Outstanding at year end	4,967,747		$	8.77	5,244,549		$	7.51	4,820,898		$	4.28

Options exercisable at year end	2,666,698		$	5.73	2,246,300		$	3.60	2,409,546		$	2.54

	Options Outstanding				Options Exercisable
Range of Exercise Prices	Number Outstanding at July 31, 2002	Weighted- Average Remaining Contractual Life	Weighted- Average Exercise Price		Number Exercisable at July 31, 2002	Weighted- Average Exercise Price
$2.00 - 2.60	278,646	4.13	$	2.12	265,950	$	2.10
2.75 - 4.50	2,172,001	5.53		3.41	1,688,001		3.33
5.50 - 17.00	2,366,100	8.48		13.70	706,947		12.62
17.10 - 24.25	151,000	9.39		20.84	7,800		22.53

	4,967,747	8.25	$	8.77	2,668,698	$	5.73

Fiscal years ended July 31,		2002		2001		2000
Federal:
	Current	$	29,152,300	$	23,980,400	$	14,657,600
	Deferred		2,519,700		653,800		1,333,000

			31,672,000		24,634,200		15,990,600

State:
	Current		4,304,600		3,606,300		2,574,500
	Deferred		291,800		118,200		(20,200	)

			4,596,400		3,724,500		2,554,300

		$	36,268,400	$	28,358,700	$	18,544,900

Fiscal years ending July 31,	2002	2001	2000
Basic weighted shares outstanding	88,717,600	82,339,500	80,851,200
Effect of dilutive securities-stock options	2,533,400	2,274,900	2,858,600

Diluted weighted average shares outstanding	91,251,000	84,614,400	83,709,800

2003	$	1,668,100
2004		1,567,100
2005		1,214,100
2006		721,000
2007		493,500

Fiscal years ended July 31,	2002		2001		2000
Net income, as reported	$	57,389,200	$	42,685,000	$	29,429,100
Goodwill amortization, net of tax effect		—		1,427,800		1,336,600

Adjusted net income	$	57,389,200	$	44,112,800	$	30,765,700

Basic earnings per share, as reported	$	0.65	$	0.52	$	0.36
Goodwill amortization, net of tax effect		—		0.02		0.02

Adjusted basic net income per share	$	0.65	$	0.54	$	0.38

Diluted earnings per share, as reported	$	0.63	$	0.50	$	0.35
Goodwill amortization, net of tax effect		—		0.02		0.02

Adjusted diluted net income per share	$	0.63	$	0.52	$	0.37

	Fiscal Quarter
	First		Second		Third		Fourth
Fiscal year 2002
Revenues	$	72,282,500	$	71,382,300	$	90,158,100	$	82,632,300

Operating income	$	20,463,800	$	19,159,100	$	26,011,100	$	24,304,900

Net income	$	12,758,200	$	12,495,200	$	16,600,400	$	15,534,600

Basic net income per share	$	.15	$	.14	$	.18	$	.17

Diluted net income per share	$	.15	$	.14	$	.18	$	.17

	First		Second		Third		Fourth
Fiscal year 2001
Revenues	$	57,139,400	$	56,638,200	$	71,480,600	$	68,631,200

Operating income	$	13,947,000	$	14,821,000	$	19,080,100	$	20,269,200

Net income	$	8,919,200	$	9,349,200	$	11,485,200	$	12,931,400

Basic net income per share	$	.11	$	.11	$	.14	$	.16

Diluted net income per share	$	.11	$	.11	$	.13	$	.15

Description and fiscal year	Balance at beginning of year		Charged to costs and expenses		Deductions Applications to bad debt			Balance at end of year
Allowance for doubtful accounts:
July 31, 2002	$	1,644,200	$	153,100	$	(594,100	)	$	1,203,200

July 31, 2001	$	1,563,500	$	643,700	$	(563,000	)	$	1,644,200

July 31, 2000	$	500,000	$	1,359,500	$	(296,000	)	$	1,563,500