CarMax 2011 Annual Report Download - page 84

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74
FUTURE MINIMUM LEASE OBLIGATIONS
(In thousands)
Fiscal 2012 3,911$ 82,430$
Fiscal 2013 3,911 81,983
Fiscal 2014 3,947 81,860
Fiscal 2015 4,188 81,631
Fiscal 2016 4,392 81,724
Fiscal 2017 and thereafter 39,223 500,397
Total minimum lease payments 59,572 910,025$
Less amounts representing interest (30,450)
Present value of net minimum capital lease payments 29,122$
As of February 28, 2011
Capital
Operating Lease
Leases (1)
Commitments (1)
(1) Excludes taxes, insurance and other costs payable directly by us. These costs vary from year to year and are incurred in the
ordinary course of business.
We did not enter into any sale-leaseback transactions in fiscal 2011 or fiscal 2010. We completed sale-leaseback
transactions involving two superstores valued at approximately $31.3 million in fiscal 2009. All sale-leaseback
transactions are structured at competitive rates. Gains or losses on sale-leaseback transactions are recorded as
deferred rent and amortized over the lease term. Other than occupancy, we do not have continuing involvement
under the sale-leaseback transactions. In conjunction with certain sale-leaseback transactions, we must meet
financial covenants relating to minimum tangible net worth and minimum coverage of rent expense. We were in
compliance with all such covenants as of February 28, 2011.
16. CONTINGENT LIABILITIES
(A) Litigation
On April 2, 2008, Mr. John Fowler filed a putative class action lawsuit against CarMax Auto Superstores California,
LLC and CarMax Auto Superstores West Coast, Inc. in the Superior Court of California, County of Los Angeles.
Subsequently, two other lawsuits, Leena Areso et al. v. CarMax Auto Superstores California, LLC and Justin
Weaver v. CarMax Auto Superstores California, LLC, were consolidated as part of the Fowler case. The allegations
in the consolidated case involved: (1) failure to provide meal and rest breaks or compensation in lieu thereof; (2)
failure to pay wages of terminated or resigned employees related to meal and rest breaks and overtime; (3) failure to
pay overtime; (4) failure to comply with itemized employee wage statement provisions; and (5) unfair competition.
The putative class consisted of sales consultants, sales managers, and other hourly employees who worked for the
company in California from April 2, 2004, to the present. On May 12, 2009, the court dismissed all of the class
claims with respect to the sales manager putative class. On June 16, 2009, the court dismissed all claims related to
the failure to comply with the itemized employee wage statement provisions. The court also granted CarMax's
motion for summary adjudication with regard to CarMax's alleged failure to pay overtime to the sales consultant
putative class. The plaintiffs have appealed the court's ruling regarding the sales consultant overtime claim. In
addition to the plaintiffs' appeal of the overtime claim, the claims currently remaining in the lawsuit regarding the
sales consultant putative class are: (1) failure to provide meal and rest breaks or compensation in lieu thereof; (2)
failure to pay wages of terminated or resigned employees related to meal and rest breaks; and (3) unfair competition.
On June 16, 2009, the court entered a stay of these claims pending the outcome of a California Supreme Court case
involving unrelated third parties but related legal issues. The Fowler lawsuit seeks compensatory and special
damages, wages, interest, civil and statutory penalties, restitution, injunctive relief and the recovery of attorneys’
fees. We are unable to make a reasonable estimate of the amount or range of loss that could result from an
unfavorable outcome in these matters.
We are involved in various other legal proceedings in the normal course of business. Based upon our evaluation of
information currently available, we believe that the ultimate resolution of any such proceedings will not have a
material adverse effect, either individually or in the aggregate, on our financial condition or results of operations.
(B) Other Matters
In accordance with the terms of real estate lease agreements, we generally agree to indemnify the lessor from certain
liabilities arising as a result of the use of the leased premises, including environmental liabilities and repairs to
leased property upon termination of the lease. Additionally, in accordance with the terms of agreements entered into