CarMax 2016 Annual Report Download - page 74
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General Act violations. The Private Attorney General Act action is based on the following allegations with respect to CarMax
sales consultants in California: (1) failure to compensate at least the minimum wage for all hours worked; (2) not providing
accurate wage statements that showed all wages earned, all hours worked, all applicable pay rates, all applicable piece rates, all
units earned, and applicable commission rates; (3) not indemnifying for employment-related expenses, including the cost of
using personal cell phones to perform business tasks; (4) not maintaining documentation of the actual hours worked each day,
all wages earned and meal breaks taken; and (5) not paying all wages due and owing upon termination of employment. The
Weiss lawsuit seeks civil penalties, fines, cost of suit, 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) 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 $6.1 million as of February 29, 2016 and $6.2 million as of February 28,
2015, 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, advertising and third-party outsourcing services. As of February 29, 2016 we have material purchase obligations of
$171.7 million, of which $122.1 million are expected to be fulfilled in fiscal 2017.