CarMax 2010 Annual Report Download - page 21

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In addition, our Corporate Governance Guidelines and Code of Business Conduct, as well as the charters of the
Audit Committee, Nominating and Governance Committee and Compensation and Personnel Committee, are
available to shareholders and the public through the “Corporate Governance” link on our investor information home
page at investor.carmax.com. Printed copies of these documents are available to any shareholder, without charge,
upon written request to our corporate secretary at the address set forth on the cover page of this report. Any changes
to these documents or reportable waivers of the Code of Business Conduct are promptly disclosed on our website.
Item 1A. Risk Factors.
We are subject to various risks, including the risks described below. Our business, results of operations and
financial condition could be materially and adversely affected by any of these risks or additional risks not presently
known or that we currently deem immaterial.
Economic Conditions. In the normal course of business, we are subject to changes in general or regional U.S.
economic conditions, including, but not limited to, consumer credit availability, consumer credit delinquency and
loss rates, interest rates, gasoline prices, inflation, personal discretionary spending levels, unemployment levels and
consumer sentiment about the economy in general. Any significant changes in economic conditions could adversely
affect consumer demand and/or increase costs.
Capital. Changes in the availability or cost of capital and working capital financing, including the long-term
financing to support our geographic expansion and financing of auto loan receivables, could adversely affect growth
and operating strategies. Further, our current credit facility and certain securitization and sale-leaseback agreements
contain covenants and/or performance triggers. Any failure to comply with these covenants and/or performance
triggers could have a material adverse effect on our business, results of operations and financial condition.
We use and have historically relied upon a securitization program to fund substantially all of the auto loan
receivables originated by CAF. Initially, we sell these receivables into our warehouse facility. We periodically
refinance the receivables through term securitizations. Changes in the condition of the asset-backed securitization
market have led, and could in the future lead, us to incur higher costs to access funds in this market or we could be
required to seek alternative means to finance our loan originations. In the event that this market ceased to exist and
there were no immediate alternative funding sources available, we might be forced to curtail our lending practices
for some period of time. The impact of reducing or curtailing CAF’s loan originations could have a material adverse
impact on our business, sales and results of operations.
Disruptions in the capital and credit markets could adversely affect our ability to draw on our revolving credit
facility. If our ability to secure funds from the facility were significantly impaired, our access to working capital
would be impacted, our ability to maintain appropriate inventory levels could be affected and these conditions could
have a material adverse effect on our business, sales, results of operations and financial condition.
Third-Party Financing Providers. CarMax provides financing to qualified customers through CAF and a number
of third-party financing providers. In the event that one or more of these third-party providers could no longer, or
choose not to, provide financing to our customers, could only provide financing to a reduced segment of our
customers or could no longer provide financing at competitive rates of interest, it could have a material impact on
our business, sales and results of operations. Additionally, if we were unable to replace current third-party financing
providers upon the occurrence of one or more of the foregoing events, it could also have a material impact on our
business, sales and results of operations.
Competition. Automotive retailing is a highly competitive business. Our competition includes publicly and
privately owned new and used car dealers, as well as millions of private individuals. Competitors sell the same or
similar makes of vehicles that we offer in the same or similar markets at competitive prices. Further, new entrants to
the market could result in increased acquisition costs for used vehicles and lower-than-expected vehicle sales and
margins. Competition could be affected by the increasing use of the Internet to market and potentially sell used
vehicles and obtain vehicle financing. The increasing use of the Internet in the automotive retailing business could
reduce our sales and adversely affect our results of operations. In addition, CAF is subject to competition from
various financial institutions.
Retail Prices. Any significant changes in retail prices for used and new vehicles could reduce sales and profits. If
any of our competitors seek to gain or retain market share by reducing prices for used or new vehicles, we would