CarMax 2013 Annual Report Download - page 18

Recent federal legislative and regulatory initiatives and reforms may result in an increase in expenses or a decrease
in revenues. For example, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-
Frank Act”) regulates, among other things, the provision of consumer financing. The Dodd-Frank Act established a
new consumer financial protection agency, the Consumer Financial Protection Bureau (“CFPB”), with broad
regulatory powers. The CFPB is responsible for administering and enforcing laws and regulations related to
consumer financial products and services. The evolving regulatory environment in the wake of the Dodd-Frank Act
and the creation of the CFPB may increase the cost of regulatory compliance or result in changes to business
practices that could have a material adverse effect on our results of operations. The Patient Protection and
Affordable Care Act of 2010, as it is phased in over time, significantly affects the provision of health care services
and may impact the cost of providing our associates with health coverage. Current federal labor policy could lead to
increased unionization efforts, which could increase labor costs, disrupt store operations, and have a material
adverse effect on our results of operations.
Reputation. Our reputation as a company that is founded on the fundamental principle of integrity is critical to our
success. Our reputation as a retailer offering a broad selection of CarMax Quality Certified vehicles at competitive,
no-haggle prices with a customer-friendly sales process in attractive, modern facilities is also critical to our success.
If we fail to maintain the high standards on which this reputation is built, or if an event occurs that damages this
reputation, it could adversely affect consumer demand and have a material adverse effect on our business, sales and
results of operations. Even the perception of a decrease in the quality of our brand could impact results.
Accordingly, if we fail to correct or mitigate misinformation or negative information, including information spread
through social media or traditional media channels, about the vehicles we offer, our customer experience, or any
aspect of our brand, it could have a material adverse effect on our business, sales and results of operations.
Confidential Customer and Associate Information. In the normal course of business, we collect, process and retain
sensitive and confidential customer and associate information and may share that information with our third-party
service providers. Despite the security measures we have in place and the assurances we have from our third-party
providers, our facilities and systems, and those of third-party service providers, could be vulnerable to external or
internal security breaches, acts of vandalism, computer viruses, misplaced or lost data, programming or human
errors or other similar events. Any security breach involving the misappropriation, loss or other unauthorized
disclosure of confidential customer or associate information, whether experienced by us or by our third-party service
providers, and whether due to an external cyber-security incident, a programming error, or other cause, could
damage our reputation, expose us to mitigation costs and the risks of private litigation and government enforcement,
disrupt our business, or otherwise have a material adverse effect on our sales and results of operations.
Growth. The expansion of our store base places significant demands on our management team, our associates and
our systems. If we fail to effectively or efficiently manage our growth, it could have a material adverse effect on our
business, sales and results of operations. In addition, our inability to acquire or lease suitable real estate at favorable
terms could limit our expansion and could have a material adverse effect on our business and results of operations.
Management and Workforce. Our success depends upon the continued contributions of our store, region and
corporate management teams. Consequently, the loss of the services of key employees could have a material
adverse effect on our business. In addition, an inability to build our management bench strength to support store
growth could have a material adverse effect on our business. Our ability to meet our staffing needs while
controlling related costs is subject to numerous external and internal factors, including unemployment levels,
prevailing wage rates, changes in employment legislation, competition for qualified employees in the industry and
regions in which we operate, and associate relations. An inability to retain qualified associates or a significant
increase in labor costs could have a material adverse effect on our business, sales and results of operations.
Information Systems. Our business is dependent upon the integrity and efficient operation of our information
systems. In particular, we rely on our information systems to effectively manage sales, inventory, carmax.com,
consumer financing and customer information. The failure of these systems to perform as designed could disrupt
our business operations and have a material adverse effect on our sales and results of operations. In addition, despite
our ongoing efforts to maintain and enhance the integrity and security of these systems, we could be subjected to
attacks by hackers, including denial-of-service attacks directed at our websites or other system breaches or
malfunctions due to associate error or misconduct or other disruptions. Such incidents could disrupt our business
and have a material adverse effect on sales and results of operations.
Litigation. We are subject to various litigation matters from time to time, which could have a material adverse
effect on our business and results of operations. Claims arising out of actual or alleged violations of law could be
asserted against us by individuals, either individually or through class actions, or by governmental entities in civil or
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