CarMax Reports Third Quarter Results

December 18, 2015

RICHMOND, Va.--(BUSINESS WIRE)-- CarMax, Inc. (NYSE:KMX) today reported results for the third quarter ended November 30, 2015.

  • Net sales and operating revenues increased 4.1% to $3.54 billion.
  • Used unit sales in comparable stores declined 0.8%.
  • Total used unit sales rose 3.2%.
  • Total wholesale unit sales increased 3.4%.
  • CarMax Auto Finance (CAF) income increased 2.9% to $92.3 million.
  • Net earnings declined 1.4% to $128.2 million, while net earnings per diluted share rose 5.0% to $0.63.

“We had a challenging sales quarter, which together with higher advertising expenses, contributed to the year-over-year decline in third quarter net earnings. However, we continued to grow both total revenues and EPS, reflecting the contributions from new stores and continued share repurchase activity," said Tom Folliard, president and chief executive officer.

Third Quarter Business Performance Review

Sales. While total used vehicle unit sales grew 3.2%, comparable store used unit sales fell 0.8% versus the prior year’s third quarter. The comparable store used unit sales performance reflected a modest decrease in store traffic, which was largely offset by improved conversion.

Wholesale vehicle unit sales grew 3.4% versus the third quarter of fiscal 2015, due to the growth in our store base.

Other sales and revenues increased 6.1% year-over-year. Extended protection plan revenues were flat, as the effect of the growth in our retail unit sales was offset by an increase in estimated cancellation reserves. Net third-party finance fees improved by 10.4% primarily due to shifts in the mix among finance providers. Vehicles financed by the Tier 3 providers (those providers to whom we pay a fee) and those included in the CAF loan origination test represented 13.7% of retail unit sales in the current quarter versus 15.2% in the prior year's third quarter.

Gross Profit. Total gross profit increased 4.0% versus last year's third quarter, to $464.3 million. Used vehicle gross profit rose 2.7%, primarily driven by the 3.2% increase in total used unit sales. Used vehicle gross profit per unit was relatively flat at $2,160 compared with $2,172 in the corresponding prior year period. Wholesale vehicle gross profit increased 5.9% versus the prior year’s quarter, driven by the combination of the 3.4% increase in wholesale vehicle unit sales and a 2.4% improvement in wholesale vehicle gross profit per unit to $949 from $927. Other gross profit rose 9.2%, primarily reflecting the increase in other sales and revenues.

SG&A. Compared with the third quarter of fiscal 2015, SG&A expenses increased 6.6% to $337.5 million. The growth primarily reflected the 10% increase in our store base since the beginning of last year’s third quarter (representing the addition of 14 stores). In addition, the increase reflected a shift in the timing of advertising expenses related to our new advertising campaign. These expenses were partially offset by a $6.5 million decrease in share-based compensation expense. SG&A per retail unit increased $81 to $2,324.

CarMax Auto Finance.(1) Compared with last year's third quarter, CAF income increased 2.9% to $92.3 million, driven by an increase in average managed receivables, which was largely offset by a lower total interest margin percentage and an increase in the provision for loan losses. Average managed receivables grew 15.4% to $9.26 billion. The total interest margin, which reflects the spread between interest and fees charged to consumers and our funding costs, declined to 6.0% of average managed receivables from 6.4% in last year’s third quarter.

Store Openings. During the third quarter, we opened two stores in existing markets (our sixth store in Houston and our second store in Minneapolis). We also relocated one store in the Washington, D.C. / Baltimore market. Subsequent to the end of the quarter, we entered the Boston market with two stores.

Financing Activities. During the third quarter, we repurchased 7.7 million shares of common stock for $445.7 million pursuant to our share repurchase program. As of November 30, 2015, we had $1.55 billion remaining available for repurchase under the program. At that date, we also had $564.0 million outstanding under our $1.2 billion revolving credit facility. The increase in outstanding revolver borrowings during the third quarter was due in large part to our stock repurchase activity and a seasonal increase in inventory.

(1) Although CAF benefits from certain indirect overhead expenditures, we have not allocated indirect costs to CAF to avoid making subjective allocation decisions.

Supplemental Financial Information

Amounts and percentage calculations may not total due to rounding.

 

             

Sales Components

 
Three Months Ended November 30 Nine Months Ended November 30
(In millions)   2015   2014   Change     2015   2014   Change
Used vehicle sales $ 2,909.0 $ 2,794.5 4.1 % $ 9,351.8 $ 8,775.0 6.6 %
New vehicle sales 42.3 54.6 (22.5 )% 162.8 194.3 (16.2 )%
Wholesale vehicle sales 513.8 481.7 6.7 % 1,682.2 1,557.2 8.0 %
Other sales and revenues:
Extended protection plan revenues 61.6 61.7 (0.1 )% 197.4 188.4 4.8 %
Service department sales 31.0 28.0 10.8 % 94.8 84.9 11.6 %
Third-party finance fees, net   (13.6 )   (15.2 )   10.4 %     (45.1 )   (45.1 )   %
Total other sales and revenues   79.0     74.5     6.1 %     247.1     228.1     8.3 %
Total net sales and operating revenues   $ 3,544.1     $ 3,405.2     4.1 %     $ 11,443.9     $ 10,754.6     6.4 %
 
           

Unit Sales

 
Three Months Ended November 30 Nine Months Ended November 30
    2015   2014   % Change   2015   2014   % Change
Used vehicles 143,673 139,158 3.2 % 464,699 433,011 7.3 %
New vehicles 1,576 2,009 (21.6 )% 6,039 7,187 (16.0 )%
Wholesale vehicles 94,066 90,988 3.4 % 302,218 286,075 5.6 %
 
         

Average Selling Prices

 
Three Months Ended November 30 Nine Months Ended November 30
    2015 2014   % Change   2015   2014   % Change
Used vehicles $ 20,094 $ 19,914 0.9 % $ 19,970 $ 20,104 (0.7 )%
New vehicles $ 26,720 $ 27,056 (1.2 )% $ 26,851 $ 26,926 (0.3 )%
Wholesale vehicles $ 5,243 $ 5,124 2.3 % $ 5,345 $ 5,277 1.3 %
 
       

Vehicle Sales Changes

 

Three Months Ended
November 30

Nine Months Ended
November 30

    2015   2014   2015   2014
Used vehicle units 3.2 % 14.0 % 7.3 % 9.9 %
Used vehicle revenues 4.1 % 16.6 % 6.6 % 13.4 %
 
Wholesale vehicle units 3.4 % 10.0 % 5.6 % 9.0 %
Wholesale vehicle revenues 6.7 % 10.2 % 8.0 % 11.0 %
 
       

Comparable Store Used Vehicle Sales Changes (1)

 

Three Months Ended
November 30

Nine Months Ended
November 30

    2015   2014   2015   2014
Used vehicle units (0.8 )% 7.4 % 3.0 % 3.5 %
Used vehicle revenues 0.0 % 9.9 % 2.3 % 6.8 %
 

(1)

 

Stores are added to the comparable store base beginning in their fourteenth full month of operation. Comparable store calculations include results for a set of stores that were included in our comparable store base in both the current and corresponding prior year periods.

 
               

Selected Operating Ratios

 
Three Months Ended November 30 Nine Months Ended November 30
(In millions)   2015   % (1)   2014   % (1)   2015   % (1)   2014   % (1)
Net sales and operating revenues $ 3,544.1 100.0 $ 3,405.2 100.0 $ 11,443.9 100.0 $ 10,754.6 100.0
Gross profit $ 464.3 13.1 $ 446.6 13.1 $ 1,529.5 13.4 $ 1,411.7 13.1
CarMax Auto Finance income $ 92.3 2.6 $ 89.7 2.6 $ 299.7 2.6 $ 276.9 2.6
Selling, general, and administrative
expenses $ 337.5 9.5 $ 316.6 9.3 $ 1,018.1 8.9 $ 927.7 8.6
Interest expense $ 10.0 0.3 $ 7.3 0.2 $ 24.6 0.2 $ 22.3 0.2
Earnings before income taxes $ 208.0 5.9 $ 210.8 6.2 $ 783.8 6.8 $ 736.5 6.8
Net earnings $ 128.2 3.6 $ 130.0 3.8 $ 482.4 4.2 $ 454.2 4.2
 

(1)

 

Calculated as a percentage of net sales and operating revenues.

 

Gross Profit

           
 
Three Months Ended November 30 Nine Months Ended November 30
(In millions)   2015   2014   Change   2015   2014   Change
Used vehicle gross profit $ 310.4 $ 302.2 2.7 % $ 1,011.2 $ 947.8 6.7 %
New vehicle gross profit 0.7 1.5 (52.3 )% 2.7 5.4 (50.5 )%
Wholesale vehicle gross profit 89.3 84.3 5.9 % 295.4 271.5 8.8 %
Other gross profit   63.9   58.6   9.2 %   220.2   186.9   17.8 %
Total   $ 464.3     $ 446.6     4.0 %   $ 1,529.5     $ 1,411.7     8.3 %
 

Gross Profit per Unit

               
 
Three Months Ended November 30 Nine Months Ended November 30
    2015   2014   2015   2014
    $ per unit(1)   %(2)   $ per unit(1)   %(2)   $ per unit(1)   %(2)   $ per unit(1)   %(2)
Used vehicle gross profit $ 2,160 10.7 $ 2,172 10.8 $ 2,176 10.8 $ 2,189 10.8
New vehicle gross profit $ 440 1.6 $ 724 2.7 $ 440 1.6 $ 747 2.8
Wholesale vehicle gross profit $ 949 17.4 $ 927 17.5 $ 977 17.6 $ 949 17.4
Other gross profit $ 440 81.0 $ 415 78.7 $ 468 89.1 $ 425 82.0
Total gross profit $ 3,197 13.1 $ 3,164 13.1 $ 3,249 13.4 $ 3,207 13.1
 

(1)

 

Calculated as category gross profit divided by each category’s respective units sold, except the other and total categories, which are calculated by dividing their respective gross profit by total retail units sold.

(2)

Calculated as a percentage of its respective sales or revenue.

 
           

SG&A Expenses

 
Three Months Ended November 30 Nine Months Ended November 30
(In millions)   2015   2014   Change   2015   2014   Change
Compensation and benefits (1) $ 176.9 $ 179.6 (1.5 )% $ 559.0 $ 540.1 3.5 %
Store occupancy costs 70.1 61.9 13.2 % 204.0 180.1 13.3 %
Advertising expense 37.5 28.3 32.5 % 106.0 88.4 19.9 %
Other overhead costs (2)   53.0   46.8   13.2 %   149.1   119.1   25.2 %
Total SG&A expenses   $ 337.5     $ 316.6     6.6 %   $ 1,018.1     $ 927.7     9.7 %
SG&A per retail unit $ 2,324 $ 2,243 $ 81 $ 2,163 $ 2,107 $ 56
 

(1)

 

Excludes compensation and benefits related to reconditioning and vehicle repair service, which are included in cost of sales.

(2)

Includes IT expenses, insurance, non-CAF bad debt, travel, preopening and relocation costs, charitable contributions and other administrative expenses. Costs for the nine months ended November 30, 2014, were reduced by $20.9 million in connection with the receipt of settlement proceeds in a class action lawsuit.

 
 

Components of CAF Income and Other CAF Information

 

               
Three Months Ended November 30 Nine Months Ended November 30
(In millions)   2015   % (1)   2014   % (1)   2015   % (1)   2014   % (1)
Interest margin:
Interest and fee income $ 172.3 7.4 $ 152.7 7.6 $ 507.0 7.5 $ 450.4 7.8
Interest expense   (33.0 )   (1.4 )   (24.8 )   (1.2 )   (91.9 )   (1.4 )   (71.8 )   (1.2 )
Total interest margin 139.3 6.0 127.9 6.4 415.1 6.2 378.6 6.5
Provision for loan losses   (30.9 )   (1.3 )   (24.1 )   (1.2 )   (70.2 )   (1.0 )   (60.3 )   (1.0 )
Total interest margin after provision
for loan losses 108.4 4.7 103.8 5.2 344.9 5.1 318.3 5.5
 
Total other expense (0.3 ) (0.4 )
 
Total direct expenses   (15.8 )   (0.7 )   (14.1 )   (0.7 )   (44.8 )   (0.7 )   (41.4 )   (0.7 )
CarMax Auto Finance income   $ 92.3     4.0     $ 89.7     4.5     $ 299.7     4.5     $ 276.9     4.8  
 
Total average managed receivables $ 9,261.4 $ 8,026.2 $ 8,973.3 $ 7,713.6
Net loans originated $ 1,224.0 $ 1,152.6 $ 3,912.1 $ 3,554.3
Net CAF penetration rate 42.9 % 41.8 % 42.6 % 41.2 %
Weighted average contract rate 7.3 % 7.0 % 7.3 % 7.1 %
 
Ending allowance for loan losses $ 90.9 $ 80.4 $ 90.9 $ 80.4
 
Warehouse facility information:
Ending funded receivables $ 1,391.0 $ 959.0 $ 1,391.0 $ 959.0
Ending unused capacity $ 1,109.0 $ 1,341.0 $ 1,109.0 $ 1,341.0
 

(1)

 

Annualized percentage of total average managed receivables.

 
           

Earnings Highlights

 

Three Months Ended November 30 Nine Months Ended November 30
(In millions except per share data)   2015   2014   Change   2015   2014   Change
Net earnings $ 128.2 $ 130.0 (1.4 )% $ 482.4 $ 454.2 6.2 %
Diluted weighted average shares outstanding 203.4 217.0 (6.3 )% 208.2 220.6 (5.6 )%
Net earnings per diluted share $ 0.63 $ 0.60 5.0 % $ 2.32 $ 2.06 12.6 %
 

Planned Store Openings

We currently plan to open the following stores within 12 months from November 30, 2015:

     
 
Location   Television Market   Market Status   Planned Opening Date
Norwood, Massachusetts (1) Boston New Q4 Fiscal 2016
Danvers, Massachusetts (1) Boston

New

Q4 Fiscal 2016
Bloomington, Illinois Peoria/Bloomington New Q4 Fiscal 2016
Buford, Georgia Atlanta Existing Q4 Fiscal 2016
O'Fallon, Illinois St. Louis Existing Q4 Fiscal 2016
Springfield, Illinois Champaign/Springfield New Q1 Fiscal 2017
Pleasanton, California San Francisco New Q1 Fiscal 2017
El Paso, Texas El Paso New Q2 Fiscal 2017
Westborough, Massachusetts Boston Existing Q2 Fiscal 2017
Fremont, California San Francisco Existing Q2 Fiscal 2017
Santa Rosa, California San Francisco Existing Q2 Fiscal 2017
Bristol, Tennessee Tri-Cities TN/VA New Q2 Fiscal 2017
Meridian, Idaho Boise New Q3 Fiscal 2017

Maple Shade, New Jersey

Philadelphia Existing Q3 Fiscal 2017
Daytona Beach, Florida Orlando - Daytona Beach Existing Q3 Fiscal 2017
Kentwood, Michigan Grand Rapids - Kalamazoo New Q3 Fiscal 2017
 

(1) Store opened in December 2015

Normal construction, permitting or other scheduling delays could shift the opening dates of any of these stores into a later period. In fiscal 2016, we plan to open 14 stores, and have relocated one store whose lease was set to expire. In each of the next two fiscal years, we plan to open between 13 and 16 stores. We currently estimate total capital expenditures will be approximately $360 million in fiscal 2016.

Conference Call Information

We will host a conference call for investors at 9:00 a.m. ET today, December 18, 2015. Domestic investors may access the call at 1-888-298-3261 (international callers dial 1-706-679-7457). The conference I.D. for both domestic and international callers is 84446739. A live webcast of the call will be available on our investor information home page at carmax2016rd.q4web.com.

A webcast replay of the call will be available at carmax2016rd.q4web.com through April 6, 2016. A telephone replay also will be available through December 25, 2015, and may be accessed by dialing 1-855-859-2056 (international callers dial 1-404-537-3406). The conference I.D. for both domestic and international callers is 84446739.

Fourth Quarter Fiscal 2016 Earnings Release Date

We currently plan to release results for the fourth quarter and fiscal year ending February 29, 2016, on Thursday, April 7, 2016, before the opening of trading on the New York Stock Exchange. We plan to host a conference call for investors at 9:00 a.m. ET on that date. Information on this conference call will be available on our investor information home page at carmax2016rd.q4web.com in March 2016.

About CarMax

CarMax, a member of the Fortune 500 and the S&P 500, and one of the Fortune “100 Best Companies to Work For,” for 11 consecutive years, is the nation’s largest retailer of used vehicles. Headquartered in Richmond, Va., CarMax currently operates 155 used car stores in 77 markets. The CarMax consumer offer features low, no-haggle prices, a broad selection of CarMax Quality Certified used vehicles and superior customer service. During the fiscal year ended February 28, 2015, the company retailed 582,282 used vehicles and sold 376,186 wholesale vehicles at our in-store auctions. For more information, access the CarMax website at www.carmax.com.

Forward-Looking Statements

We caution readers that the statements contained in this release about our future business plans, operations, opportunities or prospects, including without limitation any statements or factors regarding expected sales, margins or earnings, are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements by use of words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “outlook,” “plan,” “predict,” “should,” “will” and other similar expressions, whether in the negative or affirmative. Such forward-looking statements are based upon management’s current knowledge and assumptions about future events and involve risks and uncertainties that could cause actual results to differ materially from anticipated results. Among the factors that could cause actual results and outcomes to differ materially from those contained in the forward-looking statements are the following:

  • Changes in the competitive landscape and/or our failure to successfully adjust to such changes.
  • Events that damage our reputation or harm the perception of the quality of our brand.
  • Changes in general or regional U.S. economic conditions.
  • Changes in the availability or cost of capital and working capital financing, including changes related to the asset-backed securitization market.
  • Changes in consumer credit availability provided by our third-party financing providers.
  • Changes in the availability of extended protection plan products from third-party providers.
  • Our inability to recruit, develop and retain associates and maintain positive associate relations.
  • The loss of key associates from our store, regional or corporate management teams or a significant increase in labor costs.
  • Security breaches or other events that result in the misappropriation, loss or other unauthorized disclosure of confidential customer or associate information.
  • Significant changes in prices of new and used vehicles.
  • A reduction in the availability of or access to sources of inventory or a failure to expeditiously liquidate inventory.
  • Factors related to the regulatory and legislative environment in which we operate.
  • Factors related to geographic growth, including the inability to acquire or lease suitable real estate at favorable terms or to effectively manage our growth.
  • The failure of key information systems.
  • The effect of various litigation matters.
  • Adverse conditions affecting one or more automotive manufacturers, and manufacturer recalls.
  • The inaccuracy of estimates and assumptions used in the preparation of our financial statements, or the effect of new accounting requirements or changes to U.S. generally accepted accounting principles.
  • Factors related to seasonal fluctuations in our business.
  • The occurrence of severe weather events.
  • Factors related to the geographic concentration of our stores.

For more details on factors that could affect expectations, see our Annual Report on Form 10-K for the fiscal year ended February 28, 2015, and our quarterly or current reports as filed with or furnished to the U.S. Securities and Exchange Commission. Our filings are publicly available on our investor information home page at carmax2016rd.q4web.com. Requests for information may also be made to the Investor Relations Department by email to investor_relations@carmax.com or by calling 1-804-747-0422 ext. 4391. We undertake no obligation to update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise.

 

CARMAX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)

               
Three Months Ended November 30 Nine Months Ended November 30
(In thousands except per share data)   2015   % (1)   2014   % (1)   2015   % (1)   2014   % (1)
SALES AND OPERATING REVENUES:
Used vehicle sales $ 2,908,963 82.1 $ 2,794,515 82.1 $ 9,351,841 81.7 $ 8,775,021 81.6
New vehicle sales 42,291 1.2 54,561 1.6 162,832 1.4 194,294 1.8
Wholesale vehicle sales 513,796 14.5 481,676 14.1 1,682,195 14.7 1,557,191 14.5
Other sales and revenues   79,019     2.2     74,482     2.2     247,002     2.2     228,118     2.1
NET SALES AND OPERATING REVENUES 3,544,069 100.0 3,405,234 100.0 11,443,870 100.0 10,754,624 100.0
Cost of sales   3,079,738     86.9     2,958,614     86.9     9,914,375     86.6     9,342,934     86.9
GROSS PROFIT 464,331 13.1 446,620 13.1 1,529,495 13.4 1,411,690 13.1
CARMAX AUTO FINANCE INCOME 92,316 2.6 89,722 2.6 299,703 2.6 276,911 2.6
Selling, general and administrative expenses 337,512 9.5 316,632 9.3 1,018,075 8.9 927,716 8.6
Interest expense 10,021 0.3 7,338 0.2 24,574 0.2 22,290 0.2
Other expense   1,157         1,536        

2,791

        2,096    
Earnings before income taxes 207,957 5.9 210,836 6.2 783,758 6.8 736,499 6.8
Income tax provision   79,758     2.3     80,787     2.4     301,357     2.6     282,279     2.6
NET EARNINGS   $ 128,199     3.6     $ 130,049     3.8     $ 482,401     4.2     $ 454,220     4.2
WEIGHTED AVERAGE COMMON SHARES:
Basic 201,291 214,228 205,760 217,568
Diluted 203,383 217,025 208,242 220,585
NET EARNINGS PER SHARE:
Basic $ 0.64 $ 0.61 $ 2.34 $ 2.09
Diluted $ 0.63 $ 0.60 $ 2.32 $ 2.06
 

(1)

 

Calculated as a percentage of net sales and operating revenues and sums may not equal totals due to rounding.

 

CARMAX, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

       
(Unaudited) (Unaudited)
November 30 February 28 November 30
(In thousands except share data)   2015   2015   2014
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 33,346 $ 27,606 $ 189,880
Restricted cash from collections on auto loan receivables 316,186 294,122 275,718
Accounts receivable, net 88,530 137,690 88,180
Inventory 2,153,270 2,086,874 1,964,673
Deferred income taxes 10,878 8,100 6,368
  Other current assets   32,673     44,646     48,433  
TOTAL CURRENT ASSETS 2,634,883 2,599,038 2,573,252
Auto loan receivables, net 9,318,313 8,435,504 8,138,307
Property and equipment, net 2,105,807 1,862,538 1,833,600
Deferred income taxes 174,059 167,638 166,811
  Other assets   148,103     133,483     131,436  
  TOTAL ASSETS   $ 14,381,165     $ 13,198,201     $ 12,843,406  
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable $ 420,856 $ 454,810 $ 459,929
Accrued expenses and other current liabilities 211,833 250,307 202,533
Accrued income taxes 328 1,554 424
Short-term debt 36 785 2,574
Current portion of long-term debt 10,000
Current portion of finance and capital lease obligations 14,673 21,554 20,915
  Current portion of non-recourse notes payable   275,828     258,163     241,807  
TOTAL CURRENT LIABILITIES 923,554 997,173 928,182
Long-term debt, excluding current portion 864,000 300,000 300,000
Finance and capital lease obligations, excluding current portion 391,856 306,284 311,771
Non-recourse notes payable, excluding current portion 9,060,090 8,212,466 7,938,626
  Other liabilities   229,910     225,493     182,675  
  TOTAL LIABILITIES   11,469,410     10,041,416     9,661,254  
 
Commitments and contingent liabilities
SHAREHOLDERS’ EQUITY:

Common stock, $0.50 par value; 350,000,000 shares authorized;

197,563,192 and 208,869,688 shares issued and outstanding as of

November 30, 2015 and February 28, 2015, respectively

98,781 104,435 105,459
Capital in excess of par value 1,136,607 1,123,520 1,080,267
Accumulated other comprehensive loss (66,664 ) (65,391 ) (45,858 )
  Retained earnings   1,743,031     1,994,221     2,042,284  
  TOTAL SHAREHOLDERS’ EQUITY   2,911,755     3,156,785     3,182,152  
  TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY   $ 14,381,165     $ 13,198,201     $ 12,843,406  
 
 

CARMAX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

 

  Nine Months Ended November 30
(In thousands)   2015   2014
OPERATING ACTIVITIES:  
Net earnings $ 482,401 $ 454,220
Adjustments to reconcile net earnings to net cash
used in operating activities:
Depreciation and amortization 100,504 84,994
Share-based compensation expense 45,284 57,192
Provision for loan losses 70,165 60,274
Provision for cancellation reserves 61,048 53,764
Deferred income tax benefit (8,322 ) (13,347 )
Loss on disposition of assets and other 3,007 2,486
Net decrease (increase) in:
Accounts receivable, net 49,160 (8,257 )
Inventory (66,396 ) (323,249 )
Other current assets 12,397 (22,061 )
Auto loan receivables, net (952,974 ) (1,050,733 )
Other assets 268 (2,910 )
Net decrease in:
Accounts payable, accrued expenses and other current
liabilities and accrued income taxes (109,243 ) (16,321 )
Other liabilities   (68,878 )   (60,667 )
NET CASH USED IN OPERATING ACTIVITIES   (381,579 )   (784,615 )
INVESTING ACTIVITIES:
Capital expenditures (240,835 ) (238,860 )
Proceeds from sales of assets 1,520 5,833
Increase in restricted cash from collections on auto loan receivables (22,064 ) (16,419 )
Increase in restricted cash in reserve accounts (8,383 ) (11,323 )
Release of restricted cash from reserve accounts 5,907 6,340
Purchases of money market securities, net (6,106 ) (8,604 )
Purchases of trading securities (4,759 ) (3,468 )
Sales of trading securities   101     333  
NET CASH USED IN INVESTING ACTIVITIES   (274,619 )   (266,168 )
FINANCING ACTIVITIES:
(Decrease) increase in short-term debt, net (749 ) 1,992
Proceeds from revolving line of credit and long-term debt 1,137,300 300,000
Payments on revolving line of credit and long-term debt (583,300 )
Cash paid for debt issuance costs (3,104 ) (496 )
Payments on finance and capital lease obligations (13,310 ) (13,395 )
Issuances of non-recourse notes payable 7,430,805 5,882,000
Payments on non-recourse notes payable (6,565,516 ) (4,950,011 )
Repurchase and retirement of common stock (816,181 ) (695,582 )
Equity issuances 44,855 54,293
Excess tax benefits from share-based payment arrangements   31,138     33,961  
NET CASH PROVIDED BY FINANCING ACTIVITIES   661,938     612,762  
Increase (decrease) in cash and cash equivalents 5,740 (438,021 )
Cash and cash equivalents at beginning of year   27,606     627,901  
CASH AND CASH EQUIVALENTS AT END OF PERIOD   $ 33,346     $ 189,880  
 

Source: CarMax, Inc.

CarMax, Inc.

Investors:

Katharine Kenny, Vice President, Investor Relations, (804) 935-4591

or

Celeste Gunter, Manager, Investor Relations, (804) 935-4597

or

Media:

pr@carmax.com, (855) 887-2915

Contact Information

Katharine Kenny
Vice President, Investor Relations
(804) 935.4591
katharine_kenny@carmax.com

Celeste Gunter
Manager of Investor Relations
(804) 935.4597
celeste_gunter@carmax.com

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