CarMax 2012 Annual Report Download - page 29

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We also sell ESPs and GAP on behalf of unrelated third parties to customers who purchase a vehicle. Because we
are not the primary obligor under these plans, we recognize commission revenue at the time of sale, net of a reserve
for returns. The reserve for cancellations is recorded based on historical experience and trends, and results could be
affected if future cancellations differ from historical averages.
Income Taxes
Estimates and judgments are used in the calculation of certain tax liabilities and in the determination of the
recoverability of certain deferred tax assets. In the ordinary course of business, transactions occur for which the
ultimate tax outcome is uncertain at the time of the transactions. We adjust our income tax provision in the period in
which we determine that it is probable that our actual results will differ from our estimates. Tax law and rate
changes are reflected in the income tax provision in the period in which such changes are enacted. See Note 9 for
additional information on income taxes.
We evaluate the need to record valuation allowances that would reduce deferred tax assets to the amount that will
more likely than not be realized. When assessing the need for valuation allowances, we consider available
carrybacks, future reversals of existing temporary differences and future taxable income. Except for a valuation
allowance recorded for capital loss carryforwards that may not be utilized before their expiration, we believe that
our recorded deferred tax assets as of February 29, 2012, will more likely than not be realized. However, if a change
in circumstances results in a change in our ability to realize our deferred tax assets, our tax provision would be
affected in the period when the change in circumstances occurs.
In addition, the calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax
regulations. We recognize potential liabilities for anticipated tax audit issues in the U.S. and other tax jurisdictions
based on our estimate of whether, and the extent to which, additional taxes will be due. If payments of these
amounts ultimately prove to be unnecessary, the reversal of the liabilities would result in tax benefits being
recognized in the period when we determine the liabilities are no longer necessary. If our estimate of tax liabilities
proves to be less than the ultimate assessment, a further charge to expense would result in the period of
determination.
RESULTS OF OPERATIONS
NET SALES AND OPERATING REVENUES
(In millions) %%%
Used vehicle s ales 7,826.9$ 78.2 7,210.0$ 80.3 6,192.3$ 82.9
New vehicle s ales 200.6 2.0 198.5 2.2 186.5 2.5
W holes ale vehicle sales 1,721.6 17.2 1,301.7 14.5 844.9 11.3
Other sales and revenues:
Extended s ervice plan revenues 179.6 1.8 173.8 1.9 144.5 1.9
Service department sales 98.6 1.0 100.6 1.1 101.1 1.4
Third-party finance fees, net (23.8) (0.2) (9.1) (0.1) 0.9 ʊ
Total other s ales and revenues 254.5 2.5 265.3 3.0 246.6 3.3
Total net s ales and operating revenues 10,003.6$ 100.0 8,975.6$ 100.0 7,470.2$ 100.0
Ye ar s Ende d Fe br uar y 2 9 or 2 8
2012 2011 2010
UNIT SALES
Us ed vehicles 408,080 396,181 357,129
New vehicles 7,679 8,231 7,851
W holes ale vehicles 316,649 263,061 197,382
Ye ar s Ende d Fe bruar y 2 9 or 2 8
2012 2011 2010
AVERAGE SELLING PRICES
Used vehicles 18,995$ 18,019$ 17,152$
New vehicles 25,986$ 23,989$ 23,617$
Wholesale vehicles 5,291$ 4,816$ 4,155$
Ye ar s Ende d Fe bruar y 2 9 or 2 8
2012 2011 2010