CarMax 2015 Annual Report Download - page 16

12
impacted, our ability to maintain appropriate inventory levels could be affected and these conditions—especially if
coupled with a failure to generate significant cash flows—could have a material adverse effect on our business, sales,
results of operations and financial condition.
We rely on third-party financing providers to finance a significant portion of our customers’ vehicle purchases.
Accordingly, our sales and results of operations are partially dependent on the actions of these third parties.
We provide financing to qualified customers through CAF and a number of third-party financing providers. If one or
more of these third-party providers cease to provide financing to our customers, provide financing to fewer customers
or no longer provide financing on competitive terms, it could have a material adverse effect on our business, sales and
results of operations. Additionally, if we were unable to replace the current third-party providers upon the occurrence
of one or more of the foregoing events, it could also have a material adverse effect on our business, sales and results
of operations.
We rely on third-party providers to supply EPP products to our customers. Accordingly, our sales and results of
operations are partially dependent on the actions of these third-parties.
We sell EPP products on behalf of unrelated third-parties, who are the primary obligors, and in return we receive
commission income. The third-parties that provide ESPs are CNA National Warranty Corporation and The Warranty
Group. The third-party that provides GAP products is Safe-Guard Products International LLC. If one or more of
these third-party providers cease to provide EPP products, make changes to their products or no longer provide their
products on competitive terms, it could have a material adverse effect on our business, sales and results of operations.
Additionally, if we were unable to replace the current third-party providers upon the occurrence of one or more of the
foregoing events, it could also have a material adverse effect on our business, sales and results of operations.
Our success depends upon the continued contributions of our more than 22,000 associates.
Our associates are the driving force behind our success. We believe that one of the things that sets CarMax apart is a
culture centered on valuing all associates. Our failure to maintain this culture or to continue recruiting, developing
and retaining the associates that drive our success could have a material adverse effect on our business, sales and
results of operations. Our ability to recruit associates while controlling related costs is subject to numerous external
and internal factors, including unemployment levels, prevailing wage rates, our growth plans, changes in employment
legislation, and competition for qualified employees in the industry and regions in which we operate and for qualified
service technicians in particular. Our ability to recruit associates while controlling related costs is also subject to our
ability to maintain positive associate relations. If we are unable to do so, or if despite our efforts we become subject
to successful unionization efforts, it could increase costs, limit our ability to respond to competitive threats and have
a material adverse effect on our business, sales and results of operations.
Our success also depends upon the continued contributions of our store, region and corporate management teams.
Consequently, the loss of the services of any of these associates could have a material adverse effect on our business,
sales and results of operations. In addition, an inability to build our management bench strength to support store
growth could have a material adverse effect on our business, sales and results of operations.
We collect sensitive confidential information from our customers. A breach of this confidentiality, whether due to
a cyber-security or other incident, could result in harm to our customers and damage to our brand.
We collect, process and retain sensitive and confidential customer information in the normal course of business and
may share that information with our third-party service providers. This information includes the information
customers provide when purchasing a vehicle and applying for vehicle financing. We also collect, process and retain
sensitive and confidential associate information in the normal course of business and may share that information with
our third-party service providers. Although we have taken measures designed to safeguard such information and have
received assurances from our third-party providers, our facilities and systems, and those of third-party 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. Numerous national retailers have disclosed security breaches
involving sophisticated cyber-attacks which were not recognized or detected until after such retailers had been
affected, notwithstanding the preventive measures such retailers had in place. 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, and otherwise have a material adverse effect on our