CarMax 2014 Annual Report Download - page 21

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could be asserted against us by individuals, either individually or through class actions, or by governmental entities
in civil or criminal investigations and proceedings. These claims could be asserted under a variety of laws,
including but not limited to consumer finance laws, consumer protection laws, intellectual property laws, privacy
laws, labor and employment laws, securities laws and employee benefit laws. These actions could expose us to
adverse publicity and to substantial monetary damages and legal defense costs, injunctive relief and criminal and
civil fines and penalties, including but not limited to suspension or revocation of licenses to conduct business.
Our business is sensitive to conditions affecting automotive manufacturers.
Adverse conditions affecting one or more automotive manufacturers could have a material adverse effect on our
sales and results of operations and could impact the supply of vehicles, including the supply of late-model used
vehicles. In addition, manufacturer recalls are a common occurrence. Recalls could adversely affect used vehicle
sales or valuations and could expose us to litigation and adverse publicity related to the sale of a recalled vehicle,
which could have a material adverse effect on our business, sales and results of operations.
Our results of operations and financial condition are subject to management’s accounting judgments and
estimates, as well as changes in accounting policies.
The preparation of our financial statements requires us to make estimates and assumptions affecting the reported
amounts of CarMax’s assets, liabilities, revenues, earnings and expenses. If these estimates or assumptions are
incorrect, it could have a material adverse effect on our results of operations or financial condition. We have
identified several accounting policies as being “critical” to the fair presentation of our financial condition and results
of operations because they involve major aspects of our business and require us to make judgments about matters
that are inherently uncertain. These policies are described in Item 7, Management’s Discussion and Analysis of
Financial Condition and Results of Operations, and the notes to consolidated financial statements included in Item 8.
The implementation of new accounting requirements or other changes to U.S. generally accepted accounting
principles could have a material adverse effect on our reported results of operations and financial condition.
Our business is subject to seasonal fluctuations.
Our business is subject to seasonal fluctuations. We generally realize a higher proportion of revenue and operating
profit during the first and second fiscal quarters. If conditions arise that impair vehicle sales during the first or
second fiscal quarters, these conditions could have a disproportionately large adverse effect on our annual results of
operations.
Our business is sensitive to weather events.
The occurrence of severe weather events, such as rain, snow, wind, storms, hurricanes, extended periods of
unusually cold weather or natural disasters, could cause store closures or affect the timing of consumer demand,
either of which could adversely affect consumer traffic and could have a material adverse effect on our sales and
results of operations in a given period.
We are subject to local conditions in the geographic areas in which we are concentrated.
Our performance is subject to local economic, competitive and other conditions prevailing in geographic areas
where we operate. Since a large portion of our sales is generated in the Southeastern U.S., including Florida, and in
Texas, Southern California and Washington, D.C./Baltimore, our results of operations depend substantially on
general economic conditions and consumer spending habits in these markets. In the event that any of these
geographic areas experienced a downturn in economic conditions, it could have a material adverse effect on our
business, sales and results of operations.
Item 1B. Unresolved Staff Comments.
None.