CarMax 2015 Annual Report Download - page 77

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73
to arbitration, but the remaining claims are subject to arbitration on an individual basis. CarMax appealed this decision
on March 9, 2015 by filing a petition for review with the California Supreme Court. 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 this matter.
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) Settlement Gain
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 July 9, 2014 we received
$20.9 million in the settlement of this matter and recorded the gain at the time of receipt.
(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 $6.2 million as
of February 28, 2015, and $5.7 million as of February 28, 2014, and is included in accrued expenses and other current
liabilities.
At various times we may have certain purchase obligations that are enforceable and legally binding primarily related
to real estate purchases and third-party outsourcing services. As of February 28, 2015 we have material purchase
obligations of $98.3 million, of which $68.8 million are expected to be fulfilled in fiscal 2016.