CarMax 2012 Annual Report Download - page 66

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interest-only strip receivables related to term securitizations, previously recorded in retained interest in securitized
receivables, and we recorded a net deferred tax asset, primarily related to the establishment of the allowance for loan
losses. The combined effect of these adjustments was $54.9 million.
Except for amounts for which a valuation allowance has been provided, we believe it is more likely than not that the
results of future operations will generate sufficient taxable income to realize the deferred tax assets. The valuation
allowance as of February 29, 2012, relates to capital loss carryforwards that are not more likely than not to be
utilized prior to their expiration.
RECONCILIATION OF UNRECOGNIZED TAX BENEFITS
(In thousands)
Balance at beginning of year 18,662$ 21,952$ 25,584$
Increases for tax positions of prior years 5,403 10,183 4,756
Decreases for tax positions of prior years (6,918) (17,017) (5,114)
Increases based on tax positions related to the current year 4,754 6,712 6,186
Settlements (334) (3,168) (9,460)
Lapse of statute (637) ʊ ʊ
Balance at end of year 20,930$ 18,662$ 21,952$
Years Ended February 29 or 28
2012 2011 2010
As of February 29, 2012, we had $20.9 million of gross unrecognized tax benefits, $3.9 million of which, if
recognized, would affect our effective tax rate. It is reasonably possible that the amount of the unrecognized tax
benefit with respect to certain of our uncertain tax positions will increase or decrease during the next 12 months;
however, we do not expect the change to have a significant effect on our results of operations, financial condition or
cash flows. As of February 28, 2011, we had $18.7 million of gross unrecognized tax benefits, $3.5 million of
which, if recognized, would affect our effective tax rate. As of February 28, 2010, we had $22.0 million of gross
unrecognized tax benefits, $1.7 million of which, if recognized, would affect our effective tax rate.
Our continuing practice is to recognize interest and penalties related to income tax matters in SG&A expenses. Our
accrual for interest increased $0.6 million to $1.1 million as of February 29, 2012, from $0.5 million as of
February 28, 2011. Our accrual for interest decreased $2.6 million to $0.5 million as of February 28, 2011, from
$3.1 million as of February 28, 2010.
CarMax is subject to U.S. federal income tax as well as income tax of multiple states and local jurisdictions. With a
few insignificant exceptions, we are no longer subject to U.S. federal, state and local income tax examinations by
tax authorities for years prior to fiscal 2007.
10. BENEFIT PLANS
(A) Retirement Benefit Plans
Effective December 31, 2008, we froze both our noncontributory defined benefit pension plan (the “pension plan”)
and our noncontributory unfunded nonqualified plan (the “restoration plan”), which restores retirement benefits for
certain associates who are affected by Internal Revenue Code limitations on benefits provided under the pension
plan. No additional benefits have accrued under these plans since that date. In connection with benefits earned prior
to December 31, 2008, we have a continuing obligation to fund the pension plan and will continue to recognize net
periodic pension expense for both plans. We use a fiscal year end measurement date for both the pension plan and
the restoration plan.