CarMax 2014 Annual Report Download - page 78

74
arbitration. On October 8, 2013, CarMax filed a petition for a writ of certiorari seeking review in the United States
Supreme Court. On February 24, 2014, the United States Supreme Court granted CarMax's petition for certiorari,
vacated the California Court of Appeal decision and remanded the case to the California Court of Appeal for further
consideration. 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.
(B) Gain Contingency
The Company is a class member in a consolidated and settled class action lawsuit (In Re Toyota Motor Corp.
Unintended Acceleration Marketing, Sales Practices, and Products Liability Litig., Case No. 10-2151 (C.D. Cal.),
consolidated as of April 9, 2010) against Toyota Motor Corp. and Toyota Motor Sales, USA, Inc. (collectively,
“Toyota”) related to the economic loss associated with certain Toyota vehicles equipped with electronic throttle
controls systems and the potential unintended acceleration of these vehicles. On April 3, 2014, the claims
administrator in this matter provided notice to the Company that the Company may recover approximately $20
million (net of attorney’s fees and expenses) as its share of the settlement proceeds in the third calendar quarter of
2014. The estimated recovery: (1) may be reduced to the extent that the total claims made exceed the settlement
pool; (2) is subject to final approval of supporting documentation; and (3) remains subject to the entry of a final
approval order from the district court judge. We will recognize these proceeds when funds are received from the
claims administrator.
(C) Other Matters
In accordance with the terms of real estate lease agreements, we generally agree to indemnify the lessor from certain
liabilities arising as a result of the use of the leased premises, including environmental liabilities and repairs to
leased property upon termination of the lease. Additionally, in accordance with the terms of agreements entered into
for the sale of properties, we generally agree to indemnify the buyer from certain liabilities and costs arising
subsequent to the date of the sale, including environmental liabilities and liabilities resulting from the breach of
representations or warranties made in accordance with the agreements. We do not have any known material
environmental commitments, contingencies or other indemnification issues arising from these arrangements.
As part of our customer service strategy, we guarantee the used vehicles we retail with at least a 30-day limited
warranty. A vehicle in need of repair within this period will be repaired free of charge. As a result, each vehicle
sold has an implied liability associated with it. Accordingly, based on historical trends, we record a provision for
estimated future repairs during the guarantee period for each vehicle sold. The liability for this guarantee was
$5.7 million as of February 28, 2014, and $4.6 million as of February 29, 2013, and is included in accrued expenses
and other current liabilities.