UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-7010
DIVISION OF
CORPORATION FINANCE
Mail Stop 3561
February 29, 2008
Thomas J. Folliard
Chief Executive Officer
CarMax, Inc.
12800 Tuckahoe Creek Parkway
Richmond, VA 23238
Re: CarMax, Inc.
Form 10-K for the Fiscal Year Ended February 28, 2007
Filed April 27, 2007
Form 10-Q for the Quarter Ended November 30, 2007
Filed January 8, 2008
Dear Mr. Folliard:
We have reviewed your filings and have the following
comments.
You should comply with the comments in all future filings, as
applicable. Please confirm in writing that you will do so, and
also
explain to us how you intend to comply. If you disagree, we will
consider your explanation as to why our comments are inapplicable
or
a revision is unnecessary. Please be as detailed as necessary in
your explanation. After reviewing this information, we may raise
additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
Form 10-K for Fiscal Year Ended February 28, 2007
Item 7. Management`s Discussion and Analysis of Financial
Condition
and Results of Operations, page 18
Contractual Obligations, page 32
1. Please disclose scheduled interest payments under your
revolving
credit agreement in the table or in a footnote to the table.
Given
that the interest rate under your revolving credit agreement is
variable, you should disclose the basis for your computation of
estimated interest payments. Please also include obligations
related
to your defined benefit retirement plans and other non-current
liabilities reflected in your balance sheet or disclose pertinent
data for an understanding of the timing and amount of such
obligations. In addition, please disclose that lease obligations
exclude insurance, taxes, maintenance and other costs and provide
a
context for readers to understand the impact of such costs on the
obligations. Refer to Item 303(a)(5) of Regulation S-K and
Section
IV.A and footnote 46 to the Commission`s Guidance Regarding
Management`s Discussion and Analysis of Financial Condition and
Results of Operations.
Financial Statements
2. We note your disclosure in the description of your business,
properties and management`s discussion and analysis of financial
condition and results of operations that you operate mega and
standard (or production) superstores and satellite (or non-
production
superstores) and that some of your new car franchises are operated
from separate stores co-located with superstores. We also
understand
that your chief operating decision maker allocates resources based
on
consolidated financial results and financial performance of each
store. As such, please tell us why it is appropriate to aggregate
mega, standard and satellite stores and new car stores as a single
reportable operating segment. Please explain in detail how your
chief operating decision maker reviews the Company`s financial
results in making decisions about allocating resources and
assessing
performance. Please confirm, if true, that you have considered
the
criteria in paragraph 17 of SFAS 131, including the economic
characteristics for each store format, and support your basis for
aggregation into a single operating segment.
Consolidated Balance Sheet, page 39
3. Please tell us the items and their amounts included in deferred
revenue and other liabilities for each year presented. Please
revise
to state separately or disclose in the notes to financial
statements
any item in excess of 5% of total liabilities. Please refer to
Rule
5-02.24 of Regulation S-X.
Note 2. Summary of Significant Accounting Policies, page 42
4. Please tell us and disclose the types of costs included in cost
of
sales and selling, general and administrative expenses. We assume
that you include occupancy costs, costs of reconditioning acquired
vehicles, buying and appraisal costs and cost of services
including
those related to repair services, extended warranties and third-
party
financing services in cost of sales. If otherwise please advise.
Note 4. Securitizations, page 45
5. We note your disclosure in management`s discussion and analysis
of
financial condition and results of operations on page 28 that you
periodically repurchase receivables from the warehouse facility
and
refinance them in public securitizations. Please tell us the
nature
of your rights to reacquire the receivables and why those rights
do
not preclude sale accounting. Please address the criteria in
paragraphs 9.b. and 9.c. and other relevant paragraphs of SFAS
140.
Also, please explain to us how you treat your wholly owned SPE in
the
consolidated financial statements and the basis in GAAP for your
accounting treatment. Address the criteria in ARB 51 and/or FIN
46(R) to the extent applicable to your facts and circumstances.
6. Regarding your disclosure under the "financial covenants and
performance triggers" sub-heading on page 48, please tell us and
disclose in detail the ramification of non-compliance.
Note7. Income Taxes, page 49
7. We note that deferred income tax benefits in the provision for
income tax table differ from the amounts disclosed in the
statements
of cash flows on page 40. Please tell us how to reconcile the
amounts for each year presented.
Item 11. Executive Compensation, page 63
Incorporated by reference from Definitive Schedule 14A filed April
27, 2007
8. We note the statement at the bottom of page 15 of your Proxy
Statement that the committee considers all of the named elements
of
compensation when evaluating executive compensation. Please
revise
future filings to explain how each element and your decisions
regarding that element fit into your overall compensation
objectives
and affect decisions regarding other elements. As a non-exclusive
example, we note that the discussion of peer companies and your
percentiles within the peer group appear to exclude the realized
value of equity compensation, such as the $8.8 million and $6.5
million realized by Messrs. Folliard and Dolan in 2007. It is
unclear if and how compensation excluded from the comparison
factored
into the committee`s analyses and decisions regarding total direct
compensation and the company`s position within the peer group
percentiles.
9. In future filings where you address performance targets, such
as
the first paragraph on page 16, the second paragraph under Annual
Cash Incentive Awards on page 18, and the first full paragraph on
page 19, please revise to provide additional analysis regarding
how
you calculate performance targets. Also, please quantify the
targets
and disclose how actual performance affected the compensation
committee`s decisions regarding that year`s compensation. You
have
not provided a quantitative or qualitative discussion of the
fiscal
2007 financial or other performance targets to be achieved for
your
named executive officers to earn the annual incentive. You also
have
not included the fiscal 2008 targets. To the extent you believe
disclosure of these targets is not required because it would
result
in competitive harm, provide us on a supplemental basis a detailed
explanation under Instruction 4 to Item 402(b) of Regulation S-K
for
this conclusion. You indicate that you have exceeded the
financial
performance target in each of the last three years, but you have
not
stated clearly how difficult it is to achieve the target level of
performance. If disclosure of the performance-related factors
would
cause competitive harm, please discuss further how difficult it
will
be for you or the named executive officer to achieve the target
levels or other factors. Please see Instruction 4 to Item 402(b)
of
Regulation S-K.
Item 13 Certain Relationships and Related Transactions, page 63
Incorporated by reference from Definitive Schedule 14A filed April
27, 2007
10. In future filings please revise to include disclosure of all
related person transactions. We note the statement on page 36
that
Mr. Sharp received administrative support services valued at
$137,934
during fiscal 2007.
Form 10-Q for Fiscal Quarter Ended November 30, 2007
Financial Statements
Note 4. Securitizations, page 7
11. You disclose under the "continuing involvement with
securitized
receivables" sub-heading on page 9 that no servicing asset or
liability has been recorded. Please tell us when you adopted SFAS
156 which was effective for fiscal years beginning after September
15, 2006. Please also tell us why you have not recognized
servicing
assets or liabilities subsequent to the effective date of SFAS
156.
* * *
As appropriate, please amend your filings and respond to
these
comments within 10 business days or tell us when you will provide
us
with a response. You may wish to provide us with marked copies of
the amendment to expedite our review. Please furnish a cover
letter
with your amendment that keys your responses to our comments and
provides any requested information. Detailed cover letters
greatly
facilitate our review. Please understand that we may have
additional
comments after reviewing your amendment and responses to our
comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing to be certain that the
filing includes all information required under the Securities
Exchange Act of 1934 and that they have provided all information
investors require for an informed investment decision. Since the
company and its management are in possession of all facts relating
to
a company`s disclosure, they are responsible for the accuracy and
adequacy of the disclosures they have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in the filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
Any accounting-related questions may be directed to Anthony
Watson, Staff Accountant at (202) 551-3318 or William Thompson,
Branch Chief at (202) 551-3344. Questions on other disclosure
issues
may be directed to Jim Lopez, Senior Staff Attorney, at (202) 551-
3536, or me at (202) 551-3720.
Sincerely,
H. Christopher Owings
Assistant Director
Thomas J. Folliard
CarMax, Inc.
February 29, 2008
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