CarMax 2014 Annual Report Download - page 20

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The violation of any of these laws or regulations could result in administrative, civil or criminal penalties or in a
cease-and-desist order against our business operations, any of which could damage our reputation and have a
material adverse effect on our business, sales and results of operations. We have incurred and will continue to incur
capital and operating expenses and other costs to comply with these laws and regulations.
Recent federal legislative and regulatory initiatives and reforms may result in an increase in expenses or a decrease
in revenues, which could have a material adverse effect on our results of operations. 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 will increase the costs we incur to provide 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 business, sales and
results of operations.
Private plaintiffs and federal, state and local regulatory and law enforcement authorities continue to scrutinize
advertising, sales, financing and insurance activities in the sale and leasing of motor vehicles. If, as a result, other
automotive retailers adopt more transparent, consumer-oriented business practices, our differentiation versus those
retailers could be reduced. See the risk factor titled “We operate in a highly competitive industry” for discussion of
this risk.
We are a growth retailer. Our failure to manage our growth and the related challenges could have a material
adverse effect on our business, sales and results of operations.
The expansion of our store base places significant demands on our management team, our associates and our
information 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. The expansion of our store base also requires us to recruit and
retain the associates necessary to support that expansion. See the risk factor above titled “Our success depends upon
the continued contributions of our more than 20,000 associates” for discussion of this risk. The expansion of our
store base also requires real estate. 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.
If we are forced to curtail or stop growth, as we did during the recession, it could have a material adverse effect on
our business and results of operations.
We rely on sophisticated information systems to run our business. The failure of these systems could have a
material adverse effect on our business, sales and results of operations.
Our business is dependent upon the integrity and efficient operation of our information systems. In particular, we
rely on our information systems to manage sales, inventory, our customer-facing websites (carmax.com and
carmaxauctions.com), consumer financing and customer information. The failure of these systems to perform as
designed, or the failure to maintain or update these systems as necessary, 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. See the risk factor above titled “We
collect sensitive confidential information from our customers” for the risks associated with a breach of confidential
customer or associate information.
We are subject to numerous legal proceedings. If the outcomes of these proceedings are adverse to CarMax, it
could have a material adverse effect on our business, results of operations and financial condition.
We are subject to various litigation matters from time to time, which could have a material adverse effect on our
business, results of operations and financial condition. Claims arising out of actual or alleged violations of law