Company: KMX
Filing Date: 2025-04-11
Form Type: 10-K
Source: 0001170010-25-000024
Chunk: 100

Company: CARMAX INC
Filing Date: 2025-04-11
Form: 10-K
Item: Item 8
Chunk 100
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, respectively; and the current portion of cancellation reserves.  See Note 9 for additional information on cancellation reserves.(M)Defined Benefit Plan ObligationsThe recognized funded status of defined benefit retirement plan obligations is included both in accrued expenses and other current liabilities and in other liabilities.  The current portion represents benefits expected to be paid from our benefit restoration plan over the next 12 months.  The defined benefit retirement plan obligations are determined using a number of actuarial assumptions.  Key assumptions used in measuring the plan obligations include the discount rate, rate of return on plan assets and mortality rate.  See Note 11 for additional information on our benefit plans.(N)Insurance LiabilitiesInsurance liabilities are included in accrued expenses and other current liabilities.  We use a combination of insurance and self-insurance for a number of risks including workers’ compensation, general liability and employee-related health care costs, a portion of which is paid by associates.  Estimated insurance liabilities are determined by considering historical claims experience, demographic factors and other actuarial assumptions.

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(O)Revenue RecognitionOur revenue consists primarily of used and wholesale vehicle sales, as well as sales from EPP products, advertising and subscription revenues earned by our Edmunds business and vehicle repair service revenues.  See Note 2 for additional information on our significant accounting policies related to revenue recognition.(P)Cost of SalesCost of sales includes the cost to acquire vehicles and the reconditioning and transportation costs associated with preparing the vehicles for resale.  It also includes payroll, fringe benefits, and parts, labor and overhead costs associated with reconditioning and vehicle repair services.  The gross profit earned by our service department for used vehicle reconditioning service is a reduction of cost of sales.  We maintain a reserve to eliminate the internal profit on vehicles that have not been sold. (Q)Selling, General and Administrative ExpensesSelling, general and administrative (“SG&A”) expenses primarily include compensation and benefits, other than payroll related to reconditioning and vehicle repair services; rent and other occupancy costs; advertising; and other, including IT expenses, non-CAF bad debt, insurance, preopening and relocation costs, travel, charitable contributions, and other administrative expenses.(R)Advertising ExpensesAdvertising costs are expensed as incurred and substantially all are included in SG&A expenses.  Total advertising expenses were $261.9 million in fiscal 2025, $265.6 million in fiscal 2024 and $295.6