CarMax Reports Second Quarter Results

September 22, 2017

RICHMOND, Va.--(BUSINESS WIRE)-- CarMax, Inc. (NYSE:KMX) today reported results for the second quarter ended August 31, 2017. Year-over-year highlights include:

  • Net sales and operating revenues increased 9.7% to $4.39 billion.
  • Used unit sales in comparable stores increased 5.3%.
  • Total used unit sales rose 11.1%.
  • Total wholesale unit sales increased 0.4%.
  • CarMax Auto Finance (CAF) income increased 12.5% to $107.9 million.
  • Net earnings increased 11.7% to $181.4 million and net earnings per diluted share rose 16.7% to $0.98.

Second Quarter Business Performance Review

Sales. Total used vehicle unit sales grew 11.1% and comparable store used unit sales rose 5.3% versus the prior year’s second quarter. The comparable store sales performance reflected continued solid improvement in conversion resulting from strong execution by our store teams and our digital initiatives. In connection with Hurricane Harvey, our six stores in Houston, Texas, were closed most of the last week of this year’s second quarter, which had a modest adverse effect on comparable store used unit sales.

Wholesale vehicle unit sales increased 0.4% compared with the second quarter of fiscal 2017, as contributions from the growth in our store base and an increase in our appraisal buy rate were offset by a reduction in appraisal traffic.

Other sales and revenues increased 6.4% compared with the second quarter of fiscal 2017, primarily reflecting improvements in extended protection plan (EPP) revenues, partially offset by a decline in net third-party finance fees. EPP revenues increased 13.9%, largely due to the growth in our used unit sales. The $3.3 million reduction in third-party finance fees reflected shifts in our sales mix by finance channel.

Gross Profit. Total gross profit increased 10.8% versus last year’s second quarter, to $604.0 million. Used vehicle gross profit rose 12.0%, driven by the 11.1% increase in total used unit sales. Used vehicle gross profit per unit was consistent at $2,178 versus $2,160 in the prior year period. Wholesale vehicle gross profit increased 9.6% versus the prior year’s quarter, primarily due to an increase in wholesale vehicle gross profit per unit to $950 from $870. We believe this year’s second quarter wholesale gross profit per unit benefited from a favorable depreciation environment, relative to historical trends. Other gross profit increased 6.9%, primarily reflecting the changes in other sales and revenues.

SG&A. Compared with the second quarter of fiscal 2017, SG&A expenses increased 10.6% to $405.1 million. Several factors contributed to the increase, including: (i) the 12% increase in our store base since the beginning of last year’s second quarter (representing the addition of 19 stores), (ii) higher variable costs associated with our comparable store unit growth, and (iii) a $15.8 million year-over-year increase in the accrual for the company’s incentive pay. These increases were partially offset by an $11.4 million decline in share-based compensation expense. The prior year’s second quarter share-based compensation expense included $10.9 million related to the modification of equity awards for our retired chief executive officer. SG&A per used unit was $2,178 in the current quarter, down $9 year-over-year. The decline in share-based compensation expense reduced SG&A per unit by $78.

CarMax Auto Finance.(1) Compared with last year’s second quarter, CAF income increased 12.5% to $107.9 million. Average managed receivables grew 10.6% to $11.11 billion. The total interest margin, which reflects the spread between interest and fees charged to consumers and our funding costs, was 5.8% of average managed receivables compared with 5.9% in last year’s second quarter. The provision for loan losses declined 7.8% to $32.9 million, compared with $35.7 million in the prior year quarter. The prior year’s provision was affected by unfavorable loss experience, while in the current year’s quarter, losses were generally consistent with expectations. The allowance for loan losses as a percentage of ending managed receivables was 1.15% as of August 31, 2017, compared with 1.18% reported as of May 31, 2017, and up from the 1.08% reported as of August 31, 2016, reflecting higher loss experience over the course of the last year.

Interest Expense. Interest expense rose to $16.8 million in the second quarter of fiscal 2018 from $13.9 million in the prior year’s second quarter. The increase reflected the combination of increases in finance and capital lease obligations and outstanding debt in fiscal 2018, as well as a reduction in capitalized interest.

Store Openings. During the second quarter of fiscal 2018, we opened three stores. We entered one new television market (Salisbury, Maryland) and we added two stores in existing television markets (San Francisco, California, and Hartford, Connecticut).

Share Repurchase Activity. During the second quarter of fiscal 2018, we repurchased 2.5 million shares of common stock for $156.5 million pursuant to our share repurchase program. As of August 31, 2017, we had $1.25 billion remaining available for repurchase under the program.

 

(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 August 31 Six Months Ended August 31
(In millions)   2017   2016   Change   2017   2016   Change
Used vehicle sales $ 3,694.2   $ 3,300.8   11.9 % $ 7,537.6   $ 6,729.8   12.0 %
Wholesale vehicle sales 547.8 560.4 (2.3 )% 1,101.2 1,128.1 (2.4 )%
Other sales and revenues:
Extended protection plan revenues 85.5 75.1 13.9 % 177.4 151.3 17.3 %
Third-party finance fees, net (11.6 ) (8.3 ) (40.3 )% (23.0 ) (20.2 ) (14.0 )%
Other   70.8     69.2     2.2 %   135.8     134.6     0.9 %
Total other sales and revenues   144.7     136.0     6.4 %   290.2     265.7     9.2 %
Total net sales and operating revenues   $ 4,386.6     $ 3,997.2     9.7 %   $ 8,929.0     $ 8,123.6     9.9 %
 

Unit Sales

   
Three Months Ended August 31 Six Months Ended August 31
    2017   2016   Change   2017   2016   Change
Used vehicles 186,019   167,412   11.1 % 381,292   338,488   12.6 %
Wholesale vehicles 105,508 105,108 0.4 % 208,951 208,570 0.2 %
 

Average Selling Prices

   
Three Months Ended August 31 Six Months Ended August 31
    2017   2016   Change   2017   2016   Change
Used vehicles $ 19,667   $ 19,530   0.7 % $ 19,570   $ 19,696   (0.6 )%
Wholesale vehicles $ 4,957 $ 5,119 (3.2 )% $ 5,034 $ 5,193 (3.1 )%
 

Vehicle Sales Changes

   

Three Months Ended
August 31

Six Months Ended
August 31
    2017   2016   2017   2016
Used vehicle units 11.1 %   7.0 % 12.6 %   5.4 %
Used vehicle revenues 11.9 % 4.8 % 12.0 % 4.5 %
 
Wholesale vehicle units 0.4 % (1.3 )% 0.2 % 0.2 %
Wholesale vehicle revenues (2.3 )% (5.3 )% (2.4 )% (3.4 )%
 

Comparable Store Used Vehicle Sales Changes (1)

   

Three Months Ended
August 31

Six Months Ended
August 31
    2017   2016   2017   2016
Used vehicle units 5.3 %   3.1 % 6.8 %   1.6 %
Used vehicle revenues 6.0 % 0.9 % 6.1 % 0.6 %
 
 

(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.

 

Used Vehicle Financing Penetration by Channel (Before the Impact of 3-day Payoffs) (1)

   

Three Months Ended
August 31

Six Months Ended
August 31

    2017   2016   2017   2016
CAF (2) 49.0 %   50.6 % 48.1 %   49.9 %
Tier 2 (3) 16.0 % 17.5 % 17.6 % 18.0 %
Tier 3 (4) 9.6 % 9.0 % 9.8 % 10.1 %
Other (5)   25.4 %   22.9 %   24.5 %   22.0 %
Total   100.0 %   100.0 %   100.0 %   100.0 %
 

(1)

 

Calculated as used vehicle units financed for respective channel as a percentage of total used units sold.

(2)

Includes CAF's Tier 3 loan originations, which represent less than 1% of total used units sold.

(3)

Third-party finance providers who generally pay us a fee or to whom no fee is paid.

(4)

Third-party finance providers to whom we pay a fee.

(5)

Represents customers arranging their own financing and customers that do not require financing.

 

Selected Operating Ratios

   
Three Months Ended August 31 Six Months Ended August 31
(In millions)   2017   % (1)   2016   % (1)   2017   % (1)   2016   % (1)
Net sales and operating revenues $ 4,386.6   100.0   $ 3,997.2   100.0 $ 8,929.0   100.0   $ 8,123.6   100.0
Gross profit $ 604.0 13.8 $ 545.4 13.6 $ 1,252.9 14.0 $ 1,118.0 13.8
CarMax Auto Finance income $ 107.9 2.5 $ 96.0 2.4 $ 217.3 2.4 $ 196.7 2.4
Selling, general, and administrative expenses $ 405.1 9.2 $ 366.1 9.2 $ 808.6 9.1 $ 746.4 9.2
Interest expense $ 16.8 0.4 $ 13.9 0.3 $ 33.7 0.4 $ 25.0 0.3
Earnings before income taxes $ 290.2 6.6 $ 261.7 6.5 $ 628.3 7.0 $ 544.4 6.7
Net earnings $ 181.4 4.1 $ 162.4 4.1 $ 393.1 4.4 $ 337.7 4.2
 

(1)

Calculated as a percentage of net sales and operating revenues.

 

Gross Profit

   
Three Months Ended August 31 Six Months Ended August 31
(In millions)   2017   2016   Change   2017   2016   Change
Used vehicle gross profit $ 405.1   $ 361.7   12.0 % $ 837.1   $ 738.3   13.4 %
Wholesale vehicle gross profit 100.3 91.5 9.6 % 204.9 194.4 5.4 %
Other gross profit   98.6   92.2   6.9 %   210.9   185.3   13.8 %
Total   $ 604.0   $ 545.4   10.8 %   $ 1,252.9   $ 1,118.0   12.1 %
 

Gross Profit per Unit

   
Three Months Ended August 31 Six Months Ended August 31
    2017   2016   2017   2016
    $ per unit(1)   %(2)   $ per unit(1)   %(2)   $ per unit(1)   %(2)   $ per unit(1)   %(2)
Used vehicle gross profit $ 2,178   11.0   $ 2,160   11.0 $ 2,195   11.1   $ 2,181   11.0
Wholesale vehicle gross profit $ 950 18.3 $ 870 16.3 $ 981 18.6 $ 932 17.2
Other gross profit $ 530 68.1 $ 551 67.8 $ 553 72.7 $ 547 69.7
Total gross profit $ 3,247 13.8 $ 3,258 13.6 $ 3,286 14.0 $ 3,303 13.8
 

(1)

Calculated as category gross profit divided by its respective units sold, except the other and total categories, which are divided by total used units sold.

(2)

Calculated as a percentage of its respective sales or revenue.

 

SG&A Expenses

   
Three Months Ended August 31 Six Months Ended August 31
(In millions)   2017   2016   Change   2017   2016   Change
Compensation and benefits (1) $ 218.2   $ 199.3   9.5 % $ 440.6   $ 415.9   6.0 %
Store occupancy costs 85.2 75.1 13.4 % 164.9 146.8 12.3 %
Advertising expense 39.6 34.5 14.8 % 77.8 69.3 12.3 %
Other overhead costs (2)   62.1   57.2   8.4 %   125.3   114.4   9.5 %
Total SG&A expenses   $ 405.1   $ 366.1   10.6 %   $ 808.6   $ 746.4   8.3 %
SG&A per used unit $ 2,178 $ 2,187 $ (9 ) $ 2,121 $ 2,205 $ (84 )
 

(1)

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

(2)

Includes IT expenses, preopening and relocation costs, insurance, travel, non-CAF bad debt, charitable contributions and other administrative expenses.

 

Components of CAF Income and Other CAF Information

   
Three Months Ended August 31 Six Months Ended August 31
(In millions)   2017   % (1)   2016   % (1)   2017   % (1)   2016   % (1)
Interest margin:            
Interest and fee income $ 213.6 7.7 $ 190.2 7.6 $ 420.3 7.7 $ 374.3 7.6
Interest expense   (52.2 )   (1.9 )   (41.8 )   (1.7 )   (101.2 )   (1.8 )   (81.2 )   (1.6 )
Total interest margin 161.4 5.8 148.4 5.9 319.1 5.8 293.1 5.9
Provision for loan losses   (32.9 )   (1.2 )   (35.7 )   (1.4 )   (61.5 )   1.1     (62.3 )   (1.3 )

Total interest margin afterprovision for loan losses

128.5 4.6 112.7 4.5 257.6 4.7 230.8 4.7
 
Total direct expenses   (20.6 )   (0.7 )   (16.7 )   (0.7 )   (40.3 )   (0.7 )   (34.1 )   (0.7 )
CarMax Auto Finance income   $ 107.9     3.9     $ 96.0     3.8     $ 217.3     4.0     $ 196.7     4.0  
 
Total average managed receivables $ 11,112.0 $ 10,049.8 $ 10,970.8 $ 9,897.4
Net loans originated $ 1,542.2 $ 1,435.3 $ 3,088.3 $ 2,878.7
Net penetration rate 43.5 % 45.3 % 42.7 % 44.6 %
Weighted average contract rate 7.6 % 7.4 % 7.7 % 7.5 %
 
Ending allowance for loan losses $ 129.5 $ 109.7 $ 129.5 $ 109.7
 
Warehouse facility information:
Ending funded receivables $ 2,061.0 $ 1,697.0 $ 2,061.0 $ 1,697.0
Ending unused capacity $ 839.0 $ 1,103.0 $ 839.0 $ 1,103.0
 

(1)

Annualized percentage of total average managed receivables.

 

Earnings Highlights

   
Three Months Ended August 31 Six Months Ended August 31
(In millions except per share data)   2017   2016   Change   2017   2016   Change
Net earnings $ 181.4   $ 162.4   11.7 % $ 393.1   $ 337.7   16.4 %
Diluted weighted average shares outstanding 184.7 193.6 (4.6 )% 185.8 194.4 (4.5 )%
Net earnings per diluted share $ 0.98 $ 0.84 16.7 % $ 2.12 $ 1.74 21.8 %
 

Planned Store Openings

We currently plan to open the following stores within 12 months from August 31, 2017. During this period, we will be entering five new television markets and expanding our presence in ten existing television markets. Of the 15 stores we plan to open during the 12 months ending August 31, 2018, 8 will be in Metropolitan Statistical Areas having populations of 600,000 or less, which we define as small markets.

     
Location   Television Market  

Metropolitan
Statistical Area

 

Planned
Opening Date

Langhorne, Pennsylvania (1) Philadelphia Philadelphia Q3 Fiscal 2018
Tyler, Texas Tyler/Longview (2) Tyler Q3 Fiscal 2018
Las Vegas, Nevada Las Vegas Las Vegas Q3 Fiscal 2018
Colma, California San Francisco/Oakland/San Jose San Francisco/Oakland Q3 Fiscal 2018
Renton, Washington Seattle/Tacoma Seattle/Tacoma Q3 Fiscal 2018
Myrtle Beach, South Carolina Myrtle Beach/Florence (2) Myrtle Beach Q4 Fiscal 2018
South Portland, Maine Portland/Auburn (2) Portland Q4 Fiscal 2018
Manchester, New Hampshire Boston Manchester Q4 Fiscal 2018
Golden, Colorado Denver Denver/Aurora Q4 Fiscal 2018
Winterville, North Carolina Greenville/New Bern/Washington (2) Greenville Q1 Fiscal 2019
McKinney, Texas Dallas/Ft. Worth Dallas/Ft. Worth Q1 Fiscal 2019
Jensen Beach, Florida Miami/Ft. Lauderdale/W. Palm Beach Port St. Lucie Q1 Fiscal 2019
Santa Fe, New Mexico Albuquerque/Santa Fe Santa Fe Q2 Fiscal 2019
Warner Robins, Georgia Macon (2) Warner Robins Q2 Fiscal 2019
Norman, Oklahoma Oklahoma City Oklahoma City Q2 Fiscal 2019
 

(1)

Store opened in September 2017.

(2)

Represents new television market as of planned store opening date.

 

Normal construction, permitting or other scheduling delays could shift the opening dates of any of these stores into a later period.

Conference Call Information

We will host a conference call for investors at 9:00 a.m. ET today, September 22, 2017. 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 73770788. A live webcast of the call will be available on our investor information home page at investors.carmax.com.

A webcast replay of the call will be available at investors.carmax.com through December 20, 2017. A telephone replay also will be available through September 29, 2017, 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 73770788.

Third Quarter Fiscal 2018 Earnings Release Date

We currently plan to release results for the third quarter ending November 30, 2017, on Thursday, December 21, 2017, 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 investors.carmax.com in early December 2017.

About CarMax

CarMax is the nation’s largest retailer of used cars, currently operating 180 stores in 39 states nationwide. CarMax revolutionized the auto industry by delivering the honest, transparent and high-integrity car buying experience customers want and deserve. For more than 20 years, CarMax has made car buying more ethical, fair and stress-free by offering a no-haggle, no-hassle experience and an incredible selection of vehicles. CarMax makes selling your car easy too, by offering no-obligation appraisals good for seven days. At CarMax, we’ll buy your car even if you don’t buy ours®. CarMax has more than 24,000 associates nationwide and for 13 consecutive years has been named as one of the Fortune 100 Best Companies to Work For®. During the twelve months ended February 28, 2017, the company retailed 671,294 used vehicles and sold 391,686 wholesale vehicles at its 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, expenses, capital expenditures, debt obligations 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 the 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.
  • 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, associate or corporate information.
  • Significant changes in prices of new and used vehicles.
  • Changes in economic conditions or other factors that result in greater credit losses for CAF’s portfolio of auto loan receivables than anticipated.
  • A reduction in the availability of or access to sources of inventory or a failure to expeditiously liquidate inventory.
  • Changes in consumer credit availability provided by our third-party finance providers.
  • Changes in the availability of extended protection plan products from third-party providers.
  • Factors related to the regulatory and legislative environment in which we operate.
  • Factors related to geographic and sales growth, including the inability to effectively manage our growth.
  • The failure of or inability to sufficiently enhance 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.
  • The performance of the third-party vendors we rely on for key components of our business.
  • 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, 2017, 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 investors.carmax.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 August 31 Six Months Ended August 31
(In thousands except per share data)   2017   % (1)   2016     % (1)   2017     % (1)   2016     % (1)
SALES AND OPERATING REVENUES:          
Used vehicle sales $ 3,694,200 84.2 $ 3,300,814 82.6 $ 7,537,573 84.4 $ 6,729,788 82.8
Wholesale vehicle sales 547,767 12.5 560,402 14.0 1,101,157 12.3 1,128,143 13.9
Other sales and revenues   144,673   3.3     136,032     3.4     290,244     3.3     265,703     3.3
NET SALES AND OPERATING REVENUES 4,386,640 100.0 3,997,248 100.0 8,928,974 100.0 8,123,634 100.0
Cost of sales   3,782,635   86.2     3,451,886     86.4     7,676,031     86.0     7,005,635     86.2
GROSS PROFIT 604,005 13.8 545,362 13.6 1,252,943 14.0 1,117,999 13.8
CARMAX AUTO FINANCE INCOME 107,936 2.5 95,969 2.4 217,299 2.4 196,727 2.4
Selling, general and administrative expenses 405,062 9.2 366,126 9.2 808,565 9.1 746,356 9.2
Interest expense 16,836 0.4 13,904 0.3 33,674 0.4 24,992 0.3
Other income   (189 )     (435 )       (282 )       (1,051 )  
Earnings before income taxes 290,232 6.6 261,736 6.5 628,285 7.0 544,429 6.7
Income tax provision   108,808   2.5     99,374     2.5     235,159     2.6     206,707     2.5
NET EARNINGS   $ 181,424   4.1     $ 162,362     4.1     $ 393,126     4.4     $ 337,722     4.2
WEIGHTED AVERAGE COMMON SHARES:
Basic 182,868 191,539 184,034 192,534
Diluted 184,696 193,623 185,778 194,437
NET EARNINGS PER SHARE:
Basic $ 0.99 $ 0.85 $ 2.14 $ 1.75
Diluted $ 0.98 $ 0.84 $ 2.12 $ 1.74
 

(1)

Percents are calculated as a percentage of net sales and operating revenues and may not total due to rounding.

   

CARMAX, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 
As of
August 31   February 28   August 31
(In thousands except share data)   2017   2017   2016
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 25,765 $ 38,416 $ 316,031
Restricted cash from collections on auto loan receivables 404,276 380,353 380,663
Accounts receivable, net 99,733 152,388 94,577
Inventory 2,231,769 2,260,563 1,918,803
  Other current assets   41,792     41,910     45,273  
TOTAL CURRENT ASSETS 2,803,335 2,873,630 2,755,347
Auto loan receivables, net 11,172,330 10,596,076 10,131,378
Property and equipment, net 2,602,323 2,518,393 2,326,178
Deferred income taxes 150,684 150,962 152,840
  Other assets   147,061     140,295     138,589  
  TOTAL ASSETS   $ 16,875,733     $ 16,279,356     $ 15,504,332  
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable $ 568,036 $ 494,989 $ 486,943
Accrued expenses and other current liabilities 251,933 266,128 246,053
Accrued income taxes 14,898 1,404 205
Short-term debt 271 62 361
Current portion of finance and capital lease obligations 9,302 9,491 13,145
  Current portion of non-recourse notes payable   357,117     333,713     337,656  
TOTAL CURRENT LIABILITIES 1,201,557 1,105,787 1,084,363
Long-term debt, excluding current portion 815,770 952,562 797,357
Finance and capital lease obligations, excluding current portion 493,200 486,645 427,273
Non-recourse notes payable, excluding current portion 10,925,034 10,387,231 9,906,016
  Other liabilities   239,186     238,551     226,978  
  TOTAL LIABILITIES   13,674,747     13,170,776     12,441,987  
 
Commitments and contingent liabilities
SHAREHOLDERS’ EQUITY:
Common stock, $0.50 par value; 350,000,000 shares authorized; 181,903,784 and 186,548,602 shares issued and outstanding as of August 31, 2017 and February 28, 2017, respectively 90,952 93,274 95,540
Capital in excess of par value 1,193,799 1,188,578 1,175,166
Accumulated other comprehensive loss (59,627 ) (56,555 ) (66,582 )
  Retained earnings   1,975,862     1,883,283     1,858,221  
  TOTAL SHAREHOLDERS’ EQUITY   3,200,986     3,108,580     3,062,345  
  TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY   $ 16,875,733     $ 16,279,356     $ 15,504,332  
 

CARMAX, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 
Six Months Ended August 31
(In thousands)   2017   2016 (1)
OPERATING ACTIVITIES:  
Net earnings $ 393,126 $ 337,722
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
Depreciation and amortization 88,078 83,013
Share-based compensation expense 36,585 60,561
Provision for loan losses 61,465 62,349
Provision for cancellation reserves 34,488 35,893
Deferred income tax provision 2,271 6,728
Other 1,013 302
Net decrease (increase) in:
Accounts receivable, net 52,655 37,594
Inventory 28,794 13,226
Other current assets (1,063 ) (16,993 )
Auto loan receivables, net (637,719 ) (656,835 )
Other assets 83 732
Net increase (decrease) in:

Accounts payable, accrued expenses and other current liabilities and accrued income taxes

66,939 52,946
Other liabilities   (45,618 )   (50,247 )
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES   81,097     (33,009 )
INVESTING ACTIVITIES:
Capital expenditures (155,110 ) (214,587 )
Proceeds from disposal of property and equipment 96 2
Increase in restricted cash from collections on auto loan receivables (23,923 ) (36,834 )
Increase in restricted cash in reserve accounts (11,409 ) (7,114 )
Release of restricted cash from reserve accounts 8,396 2,434
Purchases of money market securities, net (2,132 ) (3,439 )
Purchases of trading securities (1,344 ) (2,863 )
Sales of trading securities   370     244  
NET CASH USED IN INVESTING ACTIVITIES   (185,056 )   (262,157 )
FINANCING ACTIVITIES:
Increase (decrease) in short-term debt, net 209 (67 )
Proceeds from issuances of long-term debt 1,552,000 1,310,800
Payments on long-term debt (1,689,000 ) (1,225,800 )
Cash paid for debt issuance costs (7,623 ) (9,009 )
Payments on finance and capital lease obligations (4,475 ) (5,916 )
Issuances of non-recourse notes payable 4,987,000 4,844,000
Payments on non-recourse notes payable (4,425,923 ) (4,107,206 )
Repurchase and retirement of common stock (344,785 ) (266,025 )
Equity issuances   23,905     33,026  
NET CASH PROVIDED BY FINANCING ACTIVITIES   91,308     573,803  
(Decrease) increase in cash and cash equivalents (12,651 ) 278,637
Cash and cash equivalents at beginning of year   38,416     37,394  
CASH AND CASH EQUIVALENTS AT END OF PERIOD   $ 25,765     $ 316,031  
 

(1)

In connection with our adoption of Financial Accounting Standards Board (“FASB”) ASU 2016-09 during the first quarter of fiscal 2018, cash flows related to excess tax benefits from share-based payment arrangements are now classified as operating activities rather than financing activities. Prior period amounts have been reclassified to conform to the current period’s presentation.

Source: CarMax, Inc.

CarMax, Inc.

Investors:

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

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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