CarMax Reports Second Quarter Results

September 24, 2019

RICHMOND, Va.--(BUSINESS WIRE)-- CarMax, Inc. (NYSE:KMX), the nation’s largest retailer of used cars, today reported net income and earnings per share for the second quarter ended August 31, 2019.

Highlights:

  • Net sales and operating revenues increased 9.1% to $5.20 billion.
  • Used unit sales in comparable stores increased 3.2%.
  • Total used unit sales rose 6.2%.
  • Total wholesale unit sales increased 4.7%.
  • CarMax Auto Finance (CAF) income increased 4.1% to $114.1 million.
  • Net earnings increased 5.8% to $233.6 million and net earnings per diluted share increased 12.9% to $1.40.
  • Omni-channel experience remains on track to be available to the majority of customers by the end of fiscal 2020.

CEO Commentary:

“CarMax posted solid second quarter results, and our double-digit increase in earnings per share reflected growth across our used, wholesale and CAF operations, along with ongoing share repurchases,” said Bill Nash, president and chief executive officer.

“In addition, we made significant progress on the roll-out of our omni-channel experience, and we remain confident that this is the future of car buying,” continued Nash. “This experience, which allows customers to move seamlessly between online channels and physical locations, is now offered to approximately one-third of our customer base. And, we remain on track to reach the majority of our customers by the end of this fiscal year.”

Second Quarter Business Performance Review:

Sales . Total used vehicle unit sales increased 6.2%, including a 3.2% increase in comparable store used unit sales compared with the prior year’s second quarter. The comparable store sales performance reflected strong conversion and solid growth in web traffic.

Total wholesale vehicle unit sales increased 4.7% compared with the second quarter of fiscal 2019, largely driven by an increase in our appraisal buy rate, partially offset by lower appraisal traffic.

Other sales and revenues increased 8.5% compared with the second quarter of fiscal 2019. Extended protection plan (EPP) net revenues rose 15.0%, reflecting the combined effects of our used unit growth, increased margin and higher product penetration rates. In addition, we recognized a $6.5 million benefit for estimated EPP profit-sharing revenues compared with a $4.4 million benefit recognized in the prior year’s quarter. Net third-party finance fees were comparable with the prior year period.

Gross Profit . Total gross profit increased 6.6% versus last year’s second quarter to $693.5 million. Used vehicle gross profit rose 6.4%, largely reflecting the increase in total used unit sales. Used vehicle gross profit per unit remained stable at $2,183. Wholesale vehicle gross profit increased 5.7% versus the prior year’s quarter, driven by the increase in wholesale unit sales and an increase in wholesale vehicle gross profit per unit to $928 compared with $919 in last year’s second quarter. Other gross profit increased 8.2%, largely reflecting the improvement in other sales and revenues.

SG&A . Compared with the second quarter of fiscal 2019, SG&A expenses increased 6.0% to $480.8 million. Factors contributing to the year-over-year change included the 9% increase in our store base since the beginning of last year’s second quarter (representing the addition of 18 stores); higher costs associated with our sales growth; and continued spending to advance our technology platforms and support our core and omni-channel strategic initiatives. Due to shifts in the timing of our spend, advertising expense remained consistent with the prior year’s quarter. SG&A per used unit was $2,300 in the current quarter, down $4 year-over-year.

CarMax Auto Finance .(1) Compared with last year’s second quarter, CAF income increased 4.1% to $114.1 million, reflecting a 7.8% increase in average managed receivables, slightly offset by a higher loan loss provision. The provision for loan losses increased to $45.5 million from $40.0 million in the prior year quarter, reflecting both the growth in average managed receivables and a small increase in the provision as a percentage of managed receivables. Net losses remained well within our long-term targeted performance range. The allowance for loan losses grew slightly to 1.15% of ending managed receivables as of August 31, 2019, compared with 1.14% as of May 31, 2019, and 1.13% as of August 31, 2018. The total interest margin percentage, which represents the spread between interest and fees charged to consumers and our funding costs, remained constant at 5.7% of average managed receivables in both the current and the prior year’s second quarter.

Share Repurchase Activity . We repurchased 1.5 million shares of common stock for $128.3 million pursuant to our share repurchase program during the second quarter of fiscal 2020. As of August 31, 2019, we had $1.78 billion remaining available for repurchase under the outstanding authorization.

(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)

2019

 

2018

 

Change

 

2019

 

2018

 

Change

Used vehicle sales

$

4,346.3

 

 

$

3,975.4

 

 

9.3

%

 

$

8,887.0

 

 

$

7,996.4

 

 

11.1

%

Wholesale vehicle sales

678.3

 

 

628.0

 

 

8.0

%

 

1,340.7

 

 

1,245.6

 

 

7.6

%

Other sales and revenues:

 

 

 

 

 

 

 

 

 

 

 

Extended protection plan revenues

113.3

 

 

98.5

 

 

15.0

%

 

224.6

 

 

198.6

 

 

13.1

%

Third-party finance fees, net

(10.3

)

 

(9.7

)

 

(6.6

)%

 

(25.8

)

 

(24.2

)

 

(6.8

)%

Other

73.6

 

 

73.9

 

 

(0.4

)%

 

141.0

 

 

142.2

 

 

(0.9

)%

Total other sales and revenues

176.6

 

 

162.7

 

 

8.5

%

 

339.8

 

 

316.6

 

 

7.3

%

Total net sales and operating revenues

$

5,201.2

 

 

$

4,766.0

 

 

9.1

%

 

$

10,567.5

 

 

$

9,558.6

 

 

10.6

%

Unit Sales

 

Three Months Ended August 31

 

Six Months Ended August 31

 

2019

 

2018

 

Change

 

2019

 

2018

 

Change

Used vehicles

209,091

 

196,880

 

6.2

%

 

433,359

 

395,278

 

9.6

%

Wholesale vehicles

126,513

 

120,866

 

4.7

%

 

247,281

 

234,201

 

5.6

%

Average Selling Prices

 

Three Months Ended August 31

 

Six Months Ended August 31

 

2019

 

2018

 

Change

 

2019

 

2018

 

Change

Used vehicles

$

20,581

 

 

$

20,005

 

 

2.9

%

 

$

20,306

 

 

$

20,036

 

 

1.3

%

Wholesale vehicles

$

5,090

 

 

$

4,955

 

 

2.7

%

 

$

5,150

 

 

$

5,076

 

 

1.5

%

Vehicle Sales Changes

 

Three Months Ended
August 31

 

Six Months Ended
August 31

 

2019

2018

 

2019

2018

Used vehicle units

6.2

%

5.8

%

 

9.6

%

3.7

%

Used vehicle revenues

9.3

%

7.6

%

 

11.1

%

6.1

%

 

 

 

 

 

 

Wholesale vehicle units

4.7

%

14.6

%

 

5.6

%

12.1

%

Wholesale vehicle revenues

8.0

%

14.6

%

 

7.6

%

13.1

%

Comparable Store Used Vehicle Sales Changes (1)

 

Three Months Ended
August 31

 

Six Months Ended
August 31

 

2019

2018

 

2019

2018

Used vehicle units

3.2

%

2.1

%

 

6.3

%

(0.2

)%

Used vehicle revenues

6.3

%

3.8

%

 

7.9

%

2.2

%

(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

 

2019

 

2018

 

2019

 

2018

CAF (2)

46.8

%

 

49.3

%

 

46.5

%

 

48.8

%

Tier 2 (3)

19.7

%

 

17.0

%

 

20.0

%

 

17.0

%

Tier 3 (4)

9.6

%

 

8.8

%

 

10.6

%

 

9.9

%

Other (5)

23.9

%

 

24.9

%

 

22.9

%

 

24.3

%

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)

2019

% (1)

 

2018

% (1)

 

2019

% (1)

 

2018

% (1)

Net sales and operating revenues

$

5,201.2

 

100.0

 

 

$

4,766.0

 

100.0

 

 

$

10,567.5

 

100.0

 

 

$

9,558.6

 

100.0

 

Gross profit

$

693.5

 

13.3

 

 

$

650.6

 

13.7

 

 

$

1,435.8

 

13.6

 

 

$

1,312.0

 

13.7

 

CarMax Auto Finance income

$

114.1

 

2.2

 

 

$

109.7

 

2.3

 

 

$

230.1

 

2.2

 

 

$

225.3

 

2.4

 

Selling, general, and administrative expenses

$

480.8

 

9.2

 

 

$

453.6

 

9.5

 

 

$

970.5

 

9.2

 

 

$

891.8

 

9.3

 

Interest expense

$

21.1

 

0.4

 

 

$

18.0

 

0.4

 

 

$

38.9

 

0.4

 

 

$

36.0

 

0.4

 

Earnings before income taxes

$

305.5

 

5.9

 

 

$

289.5

 

6.1

 

 

$

656.8

 

6.2

 

 

$

609.2

 

6.4

 

Net earnings

$

233.6

 

4.5

 

 

$

220.9

 

4.6

 

 

$

500.3

 

4.7

 

 

$

459.5

 

4.8

 

(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)

2019

 

2018

 

Change

 

2019

 

2018

 

Change

Used vehicle gross profit

$

456.4

 

 

$

429.0

 

 

6.4

%

 

$

953.2

 

 

$

868.4

 

 

9.8

%

Wholesale vehicle gross profit

117.4

 

 

111.1

 

 

5.7

%

 

243.3

 

 

225.8

 

 

7.8

%

Other gross profit

119.7

 

 

110.5

 

 

8.2

%

 

239.3

 

 

217.8

 

 

9.9

%

Total

$

693.5

 

 

$

650.6

 

 

6.6

%

 

$

1,435.8

 

 

$

1,312.0

 

 

9.4

%

Gross Profit per Unit

 

Three Months Ended August 31

 

Six Months Ended August 31

 

2019

2018

 

2019

2018

 

$ per unit(1)

%(2)

$ per unit(1)

%(2)

 

$ per unit(1)

%(2)

$ per unit(1)

%(2)

Used vehicle gross profit

$

2,183

 

10.5

 

$

2,179

 

10.8

 

 

$

2,200

 

10.7

 

$

2,197

 

10.9

 

Wholesale vehicle gross profit

$

928

 

17.3

 

$

919

 

17.7

 

 

$

984

 

18.1

 

$

964

 

18.1

 

Other gross profit

$

572

 

67.8

 

$

562

 

68.0

 

 

$

552

 

70.4

 

$

551

 

68.8

 

Total gross profit

$

3,317

 

13.3

 

$

3,305

 

13.7

 

 

$

3,313

 

13.6

 

$

3,319

 

13.7

 

(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)

2019

 

2018

 

Change

 

2019

 

2018

 

Change

Compensation and benefits (1)

$

249.4

 

 

$

238.9

 

 

4.4

%

 

$

520.2

 

 

$

480.3

 

 

8.3

%

Store occupancy costs

96.7

 

 

90.8

 

 

6.5

%

 

193.3

 

 

178.6

 

 

8.2

%

Advertising expense

46.8

 

 

46.7

 

 

0.3

%

 

88.8

 

 

85.2

 

 

4.2

%

Other overhead costs (2)

87.9

 

 

77.2

 

 

13.9

%

 

168.2

 

 

147.7

 

 

13.9

%

Total SG&A expenses

$

480.8

 

 

$

453.6

 

 

6.0

%

 

$

970.5

 

 

$

891.8

 

 

8.8

%

SG&A per used unit

$

2,300

 

 

$

2,304

 

 

$

(4

)

 

$

2,239

 

 

$

2,256

 

 

$

(17

)

(1)

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

(2)

Includes IT expenses, insurance, preopening and relocation costs, non-CAF bad debt, travel, 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)

2019

 

% (1)

 

2018

 

% (1)

 

2019

 

% (1)

 

2018

 

% (1)

Interest margin:

 

 

 

 

 

 

 

 

 

Interest and fee income

$

275.7

 

8.5

 

$

242.2

 

8.0

 

 

$

541.9

 

8.4

 

$

474.5

 

8.0

 

Interest expense

(90.6

)

(2.8

)

(69.1

)

(2.3

)

 

(178.0

)

(2.8

)

(132.9

)

(2.2

)

Total interest margin

185.1

 

5.7

 

173.1

 

5.7

 

 

363.9

 

5.7

 

341.6

 

5.7

 

Provision for loan losses

(45.5

)

(1.4

)

(40.0

)

(1.3

)

 

(83.7

)

(1.3

)

(70.9

)

(1.2

)

Total interest margin after provision for loan losses

139.6

 

4.3

 

133.1

 

4.4

 

 

280.2

 

4.4

 

270.7

 

4.5

 

 

 

 

 

 

 

 

 

 

 

Total other expense

 

 

(0.3

)

 

 

 

 

(0.3

)

 

 

 

 

 

 

 

 

 

 

 

Total direct expenses

(25.5

)

(0.8

)

(23.1

)

(0.8

)

 

(50.1

)

(0.8

)

(45.1

)

(0.8

)

CarMax Auto Finance income

$

114.1

 

3.5

 

$

109.7

 

3.6

 

 

$

230.1

 

3.6

 

$

225.3

 

3.8

 

 

 

 

 

 

 

 

 

 

 

Total average managed receivables

$

13,012.1

 

 

$

12,067.5

 

 

 

$

12,859.7

 

 

$

11,921.4

 

 

Net loans originated

$

1,772.6

 

 

$

1,678.4

 

 

 

$

3,598.9

 

 

$

3,343.9

 

 

Net penetration rate

42.2

%

 

43.9

%

 

 

41.8

%

 

43.4

%

 

Weighted average contract rate

8.6

%

 

8.5

%

 

 

8.7

%

 

8.4

%

 

 

 

 

 

 

 

 

 

 

 

Ending allowance for loan losses

$

150.4

 

 

$

138.1

 

 

 

$

150.4

 

 

$

138.1

 

 

 

 

 

 

 

 

 

 

 

 

Warehouse facility information:

 

 

 

 

 

 

 

 

 

Ending funded receivables

$

2,265.0

 

 

$

2,106.0

 

 

 

$

2,265.0

 

 

$

2,106.0

 

 

Ending unused capacity

$

1,235.0

 

 

$

1,034.0

 

 

 

$

1,235.0

 

 

$

1,034.0

 

 

 

 

 

 

 

 

 

 

 

 

(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)

2019

 

2018

 

Change

 

2019

 

2018

 

Change

Net earnings

$

233.6

 

 

$

220.9

 

 

5.8

%

 

$

500.3

 

 

$

459.5

 

 

8.9

%

Diluted weighted average shares outstanding

167.3

 

 

178.2

 

 

(6.1

)%

 

167.5

 

 

178.8

 

 

(6.3

)%

Net earnings per diluted share

$

1.40

 

 

$

1.24

 

 

12.9

%

 

$

2.99

 

 

$

2.57

 

 

16.3

%

Store Openings

During the second quarter of fiscal 2020, we opened three stores -- two in existing markets (San Francisco, California, and Phoenix, Arizona) and one in a new market (Lubbock, Texas).

We currently plan to open the following stores during the 12 months ending August 31, 2020. During this period, we will be entering three new television markets and expanding our presence in ten existing television markets. Of the 13 stores we plan to open during this period, 5 will be in Metropolitan Statistical Areas having populations of 600,000 or less, which we define as small markets. Normal construction, permitting or other scheduling delays could shift the opening dates of any of these stores into a later period.

 

 

 

 

 

 

 

 

Location

Television Market

Metropolitan Statistical Area

Planned Opening Date

Denton, Texas (1)

Dallas/Ft. Worth

Dallas/Fort Worth/Arlington

Q3 Fiscal 2020

Palm Desert, California (1)

Palm Springs (2)

Riverside/San Bernardino/Ontario

Q3 Fiscal 2020

Bogart, Georgia

Atlanta

Athens/Clarke County

Q3 Fiscal 2020

Gulfport, Mississippi

Biloxi/Gulfport (2)

Gulfport/Biloxi/Pascagoula

Q3 Fiscal 2020

Fort Wayne, Indiana

Fort Wayne (2)

Fort Wayne

Q4 Fiscal 2020

Salem, Oregon

Portland

Salem

Q4 Fiscal 2020

Murfreesboro, Tennessee

Nashville

Nashville/Davidson/Murfreesboro

Q4 Fiscal 2020

Easton, Pennsylvania

Philadelphia

Allentown/Bethlehem/Easton

Q1 Fiscal 2021

Bradenton, Florida

Tampa

North Port/Sarasota/Bradenton

Q1 Fiscal 2021

Canoga Park, California

Los Angeles

Los Angeles

Q1 Fiscal 2021

Covington, Louisiana

New Orleans

New Orleans

Q1 Fiscal 2021

West Palm Beach, Florida

Miami/Ft. Lauderdale/W. Palm Beach

Miami/Ft. Lauderdale/W. Palm Beach

Q2 Fiscal 2021

Jacksonville, N. Carolina

Greenville/New Bern/Washington

Jacksonville

Q2 Fiscal 2021

(1)

 

Store opened in September 2019.

(2)

 

Represents new television market as of planned store opening date.

Conference Call Information

We will host a conference call for investors at 9:00 a.m. ET today, September 24, 2019. 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 7045117. 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 19, 2019. A telephone replay also will be available through October 1, 2019, 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 7045117.

Third Quarter Fiscal 2020 Earnings Release Date

We currently plan to release results for the third quarter ending November 30, 2019, on Friday, December 20, 2019, 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 2019.

About CarMax

CarMax, the nation’s largest retailer of used cars, revolutionized the automotive retail industry by driving integrity, honesty and transparency in every interaction. CarMax continues to innovate and is currently rolling out an omni-channel experience, providing customers the option to complete transactions entirely from home, in store, or in a seamless combination of both. CarMax has more than 200 stores nationwide, and during the latest fiscal year sold nearly 750,000 used cars and 450,000 wholesale vehicles at its in-store auctions. With more than 25,000 associates, CarMax is proud to have been recognized for 15 consecutive years as one of the Fortune 100 Best Companies to Work For®. For more information, visit 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, tax rates 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.
  • Our inability to realize the benefits associated with our omni-channel initiatives.
  • 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 volatility in the market price for our common stock.
  • 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, 2019, 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 (804) 747-0422 x7865. 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)

2019

 

% (1)

 

2018

 

% (1)

 

2019

 

% (1)

 

2018

 

% (1)

SALES AND OPERATING REVENUES:

 

 

 

 

 

 

 

 

 

Used vehicle sales

$

4,346,295

 

83.6

 

$

3,975,368

 

83.4

 

 

$

8,886,952

 

84.1

 

$

7,996,415

 

83.7

 

Wholesale vehicle sales

678,286

 

13.0

 

627,990

 

13.2

 

 

1,340,735

 

12.7

 

1,245,641

 

13.0

 

Other sales and revenues

176,570

 

3.4

 

162,677

 

3.4

 

 

339,782

 

3.2

 

316,571

 

3.3

 

NET SALES AND OPERATING REVENUES

5,201,151

 

100.0

 

4,766,035

 

100.0

 

 

10,567,469

 

100.0

 

9,558,627

 

100.0

 

COST OF SALES:

 

 

 

 

 

 

 

 

 

Used vehicle cost of sales

3,889,917

 

74.8

 

3,546,383

 

74.4

 

 

7,933,741

 

75.1

 

7,127,992

 

74.6

 

Wholesale vehicle cost of sales

560,906

 

10.8

 

516,913

 

10.8

 

 

1,097,396

 

10.4

 

1,019,858

 

10.7

 

Other cost of sales

56,875

 

1.1

 

52,103

 

1.1

 

 

100,496

 

1.0

 

98,801

 

1.0

 

TOTAL COST OF SALES

4,507,698

 

86.7

 

4,115,399

 

86.3

 

 

9,131,633

 

86.4

 

8,246,651

 

86.3

 

GROSS PROFIT

693,453

 

13.3

 

650,636

 

13.7

 

 

1,435,836

 

13.6

 

1,311,976

 

13.7

 

CARMAX AUTO FINANCE INCOME

114,131

 

2.2

 

109,667

 

2.3

 

 

230,090

 

2.2

 

225,260

 

2.4

 

Selling, general and administrative expenses

480,831

 

9.2

 

453,554

 

9.5

 

 

970,491

 

9.2

 

891,788

 

9.3

 

Interest expense

21,073

 

0.4

 

17,950

 

0.4

 

 

38,857

 

0.4

 

36,002

 

0.4

 

Other expense (income)

143

 

 

(686

)

 

 

(216

)

 

277

 

 

Earnings before income taxes

305,537

 

5.9

 

289,485

 

6.1

 

 

656,794

 

6.2

 

609,169

 

6.4

 

Income tax provision

71,938

 

1.4

 

68,595

 

1.4

 

 

156,451

 

1.5

 

149,623

 

1.6

 

NET EARNINGS

$

233,599

 

4.5

 

$

220,890

 

4.6

 

 

$

500,343

 

4.7

 

$

459,546

 

4.8

 

WEIGHTED AVERAGE COMMON SHARES:

 

 

 

 

 

 

 

 

 

Basic

165,354

 

 

176,284

 

 

 

165,839

 

 

177,211

 

 

Diluted

167,272

 

 

178,200

 

 

 

167,458

 

 

178,811

 

 

NET EARNINGS PER SHARE:

 

 

 

 

 

 

 

 

 

Basic

$

1.41

 

 

$

1.25

 

 

 

$

3.02

 

 

$

2.59

 

 

Diluted

$

1.40

 

 

$

1.24

 

 

 

$

2.99

 

 

$

2.57

 

 

(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)

2019

 

2019 (1)

 

2018 (1)

ASSETS

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

Cash and cash equivalents

$

40,737

 

 

$

46,938

 

 

$

37,147

 

Restricted cash from collections on auto loan receivables

483,374

 

 

440,669

 

 

447,642

 

Accounts receivable, net

141,091

 

 

139,850

 

 

104,883

 

Inventory

2,604,750

 

 

2,519,455

 

 

2,357,355

 

Other current assets

114,987

 

 

67,101

 

 

75,060

 

TOTAL CURRENT ASSETS

3,384,939

 

 

3,214,013

 

 

3,022,087

 

Auto loan receivables, net

13,065,959

 

 

12,428,487

 

 

12,140,455

 

Property and equipment, net

2,981,260

 

 

2,828,058

 

 

2,766,902

 

Deferred income taxes

66,048

 

 

61,346

 

 

56,354

 

Operating lease assets

456,449

 

 

 

 

 

Other assets

185,599

 

 

185,963

 

 

190,707

 

TOTAL ASSETS

$

20,140,254

 

 

$

18,717,867

 

 

$

18,176,505

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

Accounts payable

$

628,507

 

 

$

593,171

 

 

$

605,535

 

Accrued expenses and other current liabilities

301,503

 

 

318,204

 

 

267,075

 

Accrued income taxes

1,389

 

 

3,784

 

 

 

Current portion of operating lease liabilities

30,066

 

 

 

 

 

Short-term debt

915

 

 

1,129

 

 

3,296

 

Current portion of long-term debt

10,762

 

 

10,177

 

 

9,718

 

Current portion of non-recourse notes payable

423,562

 

 

385,044

 

 

397,837

 

TOTAL CURRENT LIABILITIES

1,396,704

 

 

1,311,509

 

 

1,283,461

 

Long-term debt, excluding current portion

1,689,079

 

 

1,649,244

 

 

1,328,995

 

Non-recourse notes payable, excluding current portion

12,695,050

 

 

12,127,290

 

 

11,831,967

 

Operating lease liabilities, excluding current portion

448,640

 

 

 

 

 

Other liabilities

299,224

 

 

272,796

 

 

249,964

 

TOTAL LIABILITIES

16,528,697

 

 

15,360,839

 

 

14,694,387

 

 

 

 

 

 

 

Commitments and contingent liabilities

 

 

 

 

 

SHAREHOLDERS’ EQUITY:

 

 

 

 

 

Common stock, $0.50 par value; 350,000,000 shares authorized; 164,885,648 and 167,478,924 shares issued and outstanding as of August 31, 2019 and February 28, 2019, respectively

82,442

 

 

83,739

 

 

87,645

 

Capital in excess of par value

1,313,290

 

 

1,237,153

 

 

1,265,930

 

Accumulated other comprehensive loss

(91,630

)

 

(68,010

)

 

(54,435

)

Retained earnings

2,307,455

 

 

2,104,146

 

 

2,182,978

 

TOTAL SHAREHOLDERS’ EQUITY

3,611,557

 

 

3,357,028

 

 

3,482,118

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

$

20,140,254

 

 

$

18,717,867

 

 

$

18,176,505

 

(1)

In connection with our adoption of ASC 842, the new accounting standard for leases, during the first quarter of fiscal 2020, certain prior period amounts have been reclassified to conform to the current period’s presentation. Financing obligations have been reclassified to Current portion of long-term debt and Long-term debt, excluding current portion. Capital lease obligations have been reclassified to Accrued expenses and other current liabilities and Other liabilities.

CARMAX, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

Six Months Ended August 31

(In thousands)

2019

 

2018 (1)

OPERATING ACTIVITIES:

 

 

 

Net earnings

$

500,343

 

 

$

459,546

 

Adjustments to reconcile net earnings to net cash (used in) provided by operating activities:

 

 

 

Depreciation and amortization

103,468

 

 

90,311

 

Share-based compensation expense

68,887

 

 

54,234

 

Provision for loan losses

83,693

 

 

70,863

 

Provision for cancellation reserves

45,471

 

 

38,699

 

Deferred income tax provision

3,812

 

 

2,539

 

Other

3,718

 

 

1,358

 

Net (increase) decrease in:

 

 

 

Accounts receivable, net

(1,241

)

 

28,438

 

Inventory

(85,295

)

 

33,339

 

Other current assets

(48,452

)

 

22,161

 

Auto loan receivables, net

(721,165

)

 

(675,614

)

Other assets

15,421

 

 

(7,167

)

Net (decrease) increase in:

 

 

 

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

(26,632

)

 

57,639

 

Other liabilities

(67,484

)

 

(65,461

)

NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES

(125,456

)

 

110,885

 

INVESTING ACTIVITIES:

 

 

 

Capital expenditures

(171,347

)

 

(171,111

)

Proceeds from disposal of property and equipment

3

 

 

565

 

Purchases of investments

(8,244

)

 

(5,306

)

Sales of investments

720

 

 

904

 

NET CASH USED IN INVESTING ACTIVITIES

(178,868

)

 

(174,948

)

FINANCING ACTIVITIES:

 

 

 

(Decrease) increase in short-term debt, net

(214

)

 

3,169

 

Proceeds from issuances of long-term debt

3,293,500

 

 

1,300,600

 

Payments on long-term debt

(3,284,866

)

 

(1,460,584

)

Cash paid for debt issuance costs

(10,862

)

 

(8,189

)

Payments on finance lease obligations

(1,694

)

 

(335

)

Issuances of non-recourse notes payable

5,748,000

 

 

5,486,502

 

Payments on non-recourse notes payable

(5,141,901

)

 

(4,878,974

)

Repurchase and retirement of common stock

(341,929

)

 

(381,347

)

Equity issuances

86,521

 

 

47,502

 

NET CASH PROVIDED BY FINANCING ACTIVITIES

346,555

 

 

108,344

 

Increase in cash, cash equivalents, and restricted cash

42,231

 

 

44,281

 

Cash, cash equivalents, and restricted cash at beginning of year

595,377

 

 

554,898

 

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD

$

637,608

 

 

$

599,179

 

(1)

In connection with the changes to the Consolidated Balance Sheets as a result of our adoption of ASC 842, the new accounting standard for leases, during the first quarter of fiscal 2020, payments on financing obligations have been reclassified to payments on long-term debt. Prior period amounts have been reclassified to conform to the current period’s presentation.

 

Investors:
Stacy Frole
investor_relations@carmax.com, (804) 747-0422 x7865

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

Source: CarMax, Inc.

Contact Information

Investor Relations Department
(804) 747-0422 x 7865
investor_relations@carmax.com

Stacy Frole
Vice President, Investor Relations

Celeste Gunter
Manager, Investor Relations

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