CarMax 2013 Annual Report Download - page 21

As of February 28, 2013, we leased 58 of our 118 used car superstores, our new car store and our CAF office
building in Atlanta, Georgia. We owned the remaining 60 stores currently in operation. We also owned our home
office building in Richmond, Virginia, and land associated with planned future store openings.
Expansion
Since opening our first used car superstore in 1993, we have grown organically, through the construction and
opening of company-operated stores. We do not franchise our operations. As of February 28, 2013, we operated
118 used car superstores in 58 U.S. markets, which represented approximately 53% of the U.S. population. We
believe that further geographic expansion and additional fill-in opportunities in existing markets will provide a
foundation for future sales and earnings growth.
In December 2008, we temporarily suspended store growth due to the weak economic and sales environment. We
resumed store growth in fiscal 2011, opening 3 superstores that year, 5 superstores in fiscal 2012 and 10 superstores
in fiscal 2013. We currently plan to open 13 superstores in fiscal 2014 and between 10 and 15 in each of the
following 2 fiscal years.
For additional details on our future expansion plans, see “Fiscal 2013 Planned Superstore Openings,” included in
Part II, Item 7, of this Form 10-K.
Item 3. Legal Proceedings.
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; (5) unfair
competition; and (6) California’s Labor Code Private Attorney General Act. 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
appealed the court's ruling regarding the sales consultant overtime claim. On May 20, 2011, the California Court of
Appeal affirmed the ruling in favor of CarMax. The plaintiffs filed a Petition of Review with the California
Supreme Court, which was denied. As a result, the plaintiffs’ overtime claims are no longer a part of the lawsuit.
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; (3) unfair competition; and (4) California’s Labor Code Private Attorney General
Act. 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. Subsequently, CarMax moved to lift the stay and
compel the plaintiffs’ remaining claims into arbitration on an individual basis, which the court granted on
November 21, 2011. The plaintiffs appealed the court’s ruling to the California Court of Appeal. On
March 26, 2013, the California Court of Appeal reversed the trial court's order granting CarMax's motion to compel
arbitration. CarMax intends to pursue an appeal of this decision. 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, results of operations or
cash flows.
Item 4. Mine Safety Disclosures.
None.
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