RICHMOND, Va.--(BUSINESS WIRE)--
CarMax, Inc. (NYSE:KMX) today reported results for the fourth quarter
and fiscal year ended February 29, 2016.
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Net sales and operating revenues increased 5.5% to $3.71 billion in
the fourth quarter. For the fiscal year, net sales and operating
revenues increased 6.2% to $15.15 billion.
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Used unit sales in comparable stores increased 0.7% in the fourth
quarter and 2.4% in the fiscal year.
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Total used unit sales rose 4.0% in the fourth quarter and 6.5% in the
fiscal year.
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Our data indicates that in our markets, we increased our share of the
0-10 year old used car market by approximately 1% in calendar year
2015.
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Total wholesale unit sales increased 2.3% in the fourth quarter and
4.9% in the fiscal year.
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CarMax Auto Finance (CAF) income increased 2.2% to $92.3 million in
the fourth quarter. For the fiscal year, CAF income rose 6.7% to
$392.0 million.
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In the fourth quarter, net earnings declined 1.5% to $141.0 million,
while net earnings per diluted share rose 6.0% to $0.71. Net earnings
for this year’s fourth quarter was reduced by $5.2 million, net of
tax, or $0.03 per diluted share, for an impairment-related charge
associated with a property that we no longer plan to use.
Year-over-year comparisons were affected by (i) a previously reported
adjustment to capitalized interest expense recorded in the prior
year’s quarter, which increased earnings by $4.2 million, net of tax,
or $0.02 per diluted share and (ii) the impairment-related charge
recorded in the current year’s quarter.
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For the fiscal year, net earnings increased 4.4% to $623.4 million and
net earnings per diluted share rose 11.0% to $3.03. Year-over-year
comparisons were affected by a previously announced receipt of
proceeds in a class action lawsuit in the second quarter of the prior
fiscal year, which increased earnings by $12.9 million, net of tax, or
$0.06 per diluted share.
“While we faced a somewhat more challenging sales environment in the
second half of the year, we delivered solid revenue and EPS growth in
both the fourth quarter and the fiscal year, we opened a record number
of stores and we made progress toward optimizing our capital structure
by buying back 16.3 million shares in fiscal 2016,” said Tom Folliard,
chief executive officer.
Fourth Quarter Business Performance Review
Sales. Total used vehicle unit sales
grew 4.0% and comparable store used unit sales rose 0.7% versus the
prior year’s fourth quarter. The comparable store used unit sales
performance was driven by improved conversion and the solid execution of
our store teams.
Wholesale vehicle unit sales grew 2.3% versus the fourth quarter of
fiscal 2015, driven by the growth in our store base.
Other sales and revenues declined 8.5% year-over-year primarily
reflecting our disposal of new car franchises earlier in the fiscal
year. Starting this quarter, new car sales are included as a component
of other sales and revenues. Extended protection plan (EPP) revenues
increased 4.5%, largely reflecting the growth in our used unit sales.
Net third-party finance fees improved by 12.0% 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 Tier 3 loan origination program represented 15.1% of retail unit
sales in the current quarter versus 17.0% in the prior year’s fourth
quarter.
Gross Profit. Total gross profit
increased 2.8% versus last year’s fourth quarter, to $489.3 million.
Used vehicle gross profit rose 2.1%, driven by the 4.0% increase in
total used unit sales. Used vehicle gross profit per unit declined to
$2,109 compared with $2,148 in the corresponding prior year period.
Wholesale vehicle gross profit declined 0.7% versus the prior year’s
quarter, as the 2.3% increase in wholesale vehicle unit sales was offset
by a decrease in wholesale vehicle gross profit per unit to $1,005 from
$1,036. Other gross profit rose 11.9%, primarily reflecting the
improvements in EPP revenues and net third-party finance fees.
SG&A.(1)
Compared with the fourth quarter of fiscal 2015, SG&A expenses increased
1.2% to $333.9 million. The growth primarily reflected the 10% increase
in our store base since the beginning of last year’s fourth quarter
(representing the addition of 15 stores), largely offset by a
$14.2 million decrease in share-based compensation expense. Advertising
expense was flat versus the prior year quarter, primarily reflecting a
shift in timing of expenditures to earlier quarters of fiscal 2016. SG&A
per used unit was $2,151 in the current quarter, down $60
year-over-year. The decrease in share-based compensation expense reduced
SG&A per used unit by $97.
CarMax Auto Finance.(2)
Compared with last year’s fourth quarter, CAF income rose 2.2% 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 13.9% to $9.45 billion. The total interest margin,
which reflects the spread between interest and fees charged to consumers
and our funding costs, declined to 5.9% of average managed receivables
from 6.3% in last year’s fourth quarter. The increase in the provision
for loan losses reflects the growth in our managed receivables and
favorable loss experience in last year’s fourth quarter, which reduced
the prior year provision. The allowance for loan losses as a percentage
of ending managed receivables remained similar at 0.99% as of February
29, 2016 compared with 0.97% as of February 28, 2015.
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(1)
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Starting this quarter, SG&A per unit calculations are based on
used units; previously they were based on retail units.
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(2)
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Although CAF benefits from certain indirect overhead
expenditures, we have not allocated indirect costs to CAF to avoid
making subjective allocation decisions.
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In January 2014, CAF launched a test originating loans for customers who
typically would be financed by our Tier 3 finance providers. As of
February 29, 2016, a total of $96.5 million in receivables were
outstanding related to this program. We plan to continue to originate
loans in the Tier 3 space at a share of Tier 3 originations similar to
that during the past two years.
Interest Expense. Interest expense
rose to $11.8 million in the fourth quarter of fiscal 2016 from
$2.2 million in the prior year’s quarter. During the prior year’s
quarter, interest expense was reduced by $6.9 million, before tax,
representing capitalized interest related to earlier quarters of fiscal
2015. Excluding this adjustment, the year-over-year increase in interest
expense primarily reflected our higher average outstanding debt in the
current fiscal year.
Other Expense. During the
current year’s fourth quarter, we recorded an impairment-related charge
of $8.3 million, before tax, associated with a property that we no
longer plan to use.
Store Openings. During the fourth
quarter, we opened five stores, including three stores in new markets
(two in Boston and one in Peoria/Bloomington) and two in existing
markets (our sixth store in Atlanta and our third store in St. Louis).
In total, we opened 14 stores and relocated 1 store during fiscal 2016,
bringing our used car store count to 158 as of February 29, 2016.
Share Repurchase Activity. During
the fourth quarter, we repurchased 3.0 million shares of common stock
for $155.8 million pursuant to our share repurchase program. For the
fiscal year, we repurchased 16.3 million shares at a cost of $971.2
million. As of February 29, 2016, we had $1.40 billion remaining
available for repurchase under the program.
Fiscal 2017 Capital Spending Plan
We currently plan to open between 13 and 16 stores in each of the next
two fiscal years. In fiscal 2017, we plan to open 15 stores. We
currently estimate capital expenditures will total approximately $450
million in fiscal 2017. Compared with fiscal 2016, the increase in
planned capital spending primarily reflects the timing of land
acquisitions and construction activity.
Supplemental Financial Information
Amounts and percentage calculations may not total due to rounding.
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Sales Components
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Three Months Ended February 29 or 28
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Years Ended February 29 or 28
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(In millions)
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2016
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2015
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Change
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2016
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2015
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Change
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Used vehicle sales
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$
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3,087.6
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$
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2,899.5
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6.5
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%
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$
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12,439.4
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$
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11,674.5
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6.6
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%
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Wholesale vehicle sales
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506.1
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491.9
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2.9
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%
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2,188.3
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2,049.1
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6.8
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%
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Other sales and revenues:
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Extended protection plan revenues
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70.4
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67.3
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4.5
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%
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267.8
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255.7
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4.7
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%
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Third-party finance fees, net
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(16.4
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)
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(18.6
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)
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12.0
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%
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(61.5
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)
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(63.7
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)
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3.5
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%
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Other (1)
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58.1
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74.0
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(21.3
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)%
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315.7
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353.1
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(10.6
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)%
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Total other sales and revenues
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112.1
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122.7
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(8.5
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)%
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522.0
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545.1
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(4.2
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)%
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Total net sales and operating revenues
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$
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3,705.8
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$
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3,514.1
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5.5
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%
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$
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15,149.7
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$
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14,268.7
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6.2
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%
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(1)
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In the fourth quarter of fiscal 2016, we reclassified New
Vehicle Sales to Other Sales and Revenue and no longer separately
present New Vehicle Sales. New Vehicle Sales represented
approximately 1% of total sales. All periods presented have been
revised for this new presentation.
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Unit Sales
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Three Months Ended February 29 or 28
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Years Ended February 29 or 28
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2016
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2015
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Change
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2016
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2015
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Change
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Used vehicles
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155,237
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149,271
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4.0
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%
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619,936
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582,282
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6.5
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%
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Wholesale vehicles
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92,219
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90,111
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2.3
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%
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394,437
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376,186
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4.9
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%
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Average Selling Prices
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Three Months Ended February 29 or 28
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Years Ended February 29 or 28
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2016
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2015
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Change
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2016
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2015
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Change
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Used vehicles
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$
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19,758
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$
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19,297
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2.4
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%
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$
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19,917
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$
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19,897
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0.1
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%
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Wholesale vehicles
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$
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5,267
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$
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5,257
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0.2
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%
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$
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5,327
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$
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5,273
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1.0
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%
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Vehicle Sales Changes
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Three Months Ended
February 29 or 28
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Years Ended
February 29 or 28
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2016
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2015
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2016
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2015
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Used vehicle units
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4.0
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%
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12.4
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%
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6.5
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%
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10.5
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%
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Used vehicle revenues
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6.5
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%
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12.9
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%
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6.6
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%
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13.3
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%
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Wholesale vehicle units
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2.3
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%
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12.3
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%
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4.9
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%
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9.8
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%
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Wholesale vehicle revenues
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2.9
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%
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17.0
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%
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6.8
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%
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12.4
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%
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Comparable Store Used Vehicle Sales
Changes (1)
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Three Months Ended
February 29 or 28
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Years Ended
February 29 or 28
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2016
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2015
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2016
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2015
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Used vehicle units
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0.7
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%
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7.0
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%
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2.4
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%
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4.4
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%
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Used vehicle revenues
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3.0
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%
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7.6
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%
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2.5
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%
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7.0
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%
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(1)
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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.
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Selected Operating Ratios
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Three Months Ended February 29 or 28
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Years Ended February 29 or 28
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(In millions)
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2016
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% (1)
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2015
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% (1)
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2016
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% (1)
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2015
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% (1)
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Net sales and operating revenues
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$
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3,705.8
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100.0
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$
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3,514.1
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100.0
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$
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15,149.7
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100.0
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$
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14,268.7
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100.0
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Gross profit
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$
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489.3
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13.2
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$
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475.8
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13.5
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$
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2,018.8
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13.3
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$
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1,887.5
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13.2
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CarMax Auto Finance income
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$
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92.3
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2.5
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$
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90.4
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2.6
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$
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392.0
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2.6
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$
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367.3
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2.6
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Selling, general, and administrative expenses
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$
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333.9
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9.0
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$
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330.0
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9.4
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$
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1,351.9
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8.9
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$
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1,257.7
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8.8
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Interest expense
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$
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11.8
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0.3
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$
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2.2
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0.1
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$
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36.4
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0.2
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$
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24.5
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0.2
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Earnings before income taxes
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$
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226.2
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6.1
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$
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232.8
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6.6
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$
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1,009.9
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6.7
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$
|
969.3
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6.8
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Net earnings
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$
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141.0
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3.8
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$
|
143.1
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4.1
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|
$
|
623.4
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4.1
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|
$
|
597.4
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4.2
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(1)
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Calculated as a percentage of net sales and operating revenues.
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Gross Profit
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Three Months Ended February 29 or 28
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Years Ended February 29 or 28
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(In millions)
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2016
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2015
|
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Change
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2016
|
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2015
|
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Change
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Used vehicle gross profit
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$
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327.4
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$
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320.7
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2.1
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%
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$
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1,338.6
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$
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1,268.5
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5.5
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%
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Wholesale vehicle gross profit
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92.7
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|
93.3
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(0.7
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)%
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|
388.1
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|
364.9
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6.4
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%
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Other gross profit
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69.2
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|
61.8
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11.9
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%
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|
292.1
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254.1
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|
14.9
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%
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Total
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$
|
489.3
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$
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475.8
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2.8
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%
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$
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2,018.8
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$
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1,887.5
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7.0
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%
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Gross Profit per Unit
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Three Months Ended February 29 or 28
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Years Ended February 29 or 28
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2016
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2015
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2016
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2015
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$ per unit(1)
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%(2)
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$ per unit(1)
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%(2)
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|
$ per unit(1)
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%(2)
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|
$ per unit(1)
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%(2)
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Used vehicle gross profit
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$
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2,109
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|
10.6
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$
|
2,148
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|
11.1
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|
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$
|
2,159
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|
10.8
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$
|
2,179
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|
10.9
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|
Wholesale vehicle gross profit
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$
|
1,005
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|
18.3
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$
|
1,036
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|
19.0
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$
|
984
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|
17.7
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|
$
|
970
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|
17.8
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|
Other gross profit
|
|
$
|
446
|
|
61.7
|
|
$
|
414
|
|
50.4
|
|
|
$
|
471
|
|
55.9
|
|
$
|
436
|
|
46.6
|
|
Total gross profit
|
|
$
|
3,152
|
|
13.2
|
|
$
|
3,188
|
|
13.5
|
|
|
$
|
3,256
|
|
13.3
|
|
$
|
3,242
|
|
13.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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
used units sold.
|
|
(2)
|
|
|
Calculated as a percentage of its respective sales or revenue.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SG&A Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended February 29 or 28
|
|
Years Ended February 29 or 28
|
|
(In millions)
|
|
2016
|
|
2015
|
|
Change
|
|
2016
|
|
2015
|
|
Change
|
|
Compensation and benefits (1)
|
|
$
|
178.5
|
|
$
|
190.3
|
|
|
(6.2
|
)%
|
|
$
|
737.6
|
|
$
|
730.4
|
|
|
1.0
|
%
|
|
Store occupancy costs
|
|
|
71.6
|
|
|
63.4
|
|
|
12.9
|
%
|
|
|
275.6
|
|
|
243.5
|
|
|
13.2
|
%
|
|
Advertising expense
|
|
|
34.7
|
|
|
34.4
|
|
|
0.9
|
%
|
|
|
140.6
|
|
|
122.8
|
|
|
14.5
|
%
|
|
Other overhead costs (2)
|
|
|
49.1
|
|
|
41.9
|
|
|
17.2
|
%
|
|
|
198.1
|
|
|
161.0
|
|
|
23.0
|
%
|
|
Total SG&A expenses
|
|
$
|
333.9
|
|
$
|
330.0
|
|
|
1.2
|
%
|
|
$
|
1,351.9
|
|
$
|
1,257.7
|
|
|
7.5
|
%
|
|
SG&A per used unit
|
|
$
|
2,151
|
|
$
|
2,211
|
|
$
|
(60
|
)
|
|
$
|
2,181
|
|
$
|
2,160
|
|
$
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 year ended February
28, 2015, 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 February 29 or 28
|
|
Years Ended February 29 or 28
|
|
(In millions)
|
2016
|
|
% (1)
|
|
2015
|
|
% (1)
|
|
2016
|
|
% (1)
|
|
2015
|
|
% (1)
|
|
Interest margin:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and fee income
|
$
|
175.9
|
|
|
7.4
|
|
|
$
|
154.5
|
|
|
7.4
|
|
|
$
|
682.9
|
|
|
7.5
|
|
|
$
|
604.9
|
|
|
7.7
|
|
|
Interest expense
|
|
(35.8
|
)
|
|
(1.5
|
)
|
|
|
(24.7
|
)
|
|
(1.2
|
)
|
|
|
(127.7
|
)
|
|
(1.4
|
)
|
|
|
(96.6
|
)
|
|
(1.2
|
)
|
|
Total interest margin
|
|
140.1
|
|
|
5.9
|
|
|
|
129.8
|
|
|
6.3
|
|
|
|
555.2
|
|
|
6.1
|
|
|
|
508.3
|
|
|
6.5
|
|
|
Provision for loan losses
|
|
(31.0
|
)
|
|
(1.3
|
)
|
|
|
(22.1
|
)
|
|
(1.1
|
)
|
|
|
(101.2
|
)
|
|
(1.1
|
)
|
|
|
(82.3
|
)
|
|
(1.0
|
)
|
|
Total interest margin after provision for loan losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
109.1
|
|
|
4.6
|
|
|
|
107.7
|
|
|
5.2
|
|
|
|
454.0
|
|
|
5.0
|
|
|
|
426.0
|
|
|
5.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expense
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
(0.4
|
)
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total direct expenses
|
|
(16.8
|
)
|
|
(0.7
|
)
|
|
|
(17.3
|
)
|
|
(0.8
|
)
|
|
|
(61.6
|
)
|
|
(0.7
|
)
|
|
|
(58.7
|
)
|
|
(0.7
|
)
|
|
CarMax Auto Finance income
|
$
|
92.3
|
|
|
3.9
|
|
|
$
|
90.4
|
|
|
4.4
|
|
|
$
|
392.0
|
|
|
4.3
|
|
|
$
|
367.3
|
|
|
4.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total average managed receivables
|
$
|
9,451.8
|
|
|
|
|
$
|
8,298.8
|
|
|
|
|
$
|
9,092.9
|
|
|
|
|
$
|
7,859.9
|
|
|
|
|
Net loans originated
|
$
|
1,258.9
|
|
|
|
|
$
|
1,173.5
|
|
|
|
|
$
|
5,171.0
|
|
|
|
|
$
|
4,727.8
|
|
|
|
|
Net CAF penetration rate
|
|
41.7
|
%
|
|
|
|
|
40.9
|
%
|
|
|
|
|
42.3
|
%
|
|
|
|
|
41.2
|
%
|
|
|
|
Weighted average contract rate
|
|
7.5
|
%
|
|
|
|
|
7.2
|
%
|
|
|
|
|
7.3
|
%
|
|
|
|
|
7.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending allowance for loan losses
|
$
|
94.9
|
|
|
|
|
$
|
81.7
|
|
|
|
|
$
|
94.9
|
|
|
|
|
$
|
81.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warehouse facility information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending funded receivables
|
$
|
1,399.0
|
|
|
|
|
$
|
986.0
|
|
|
|
|
$
|
1,399.0
|
|
|
|
|
$
|
986.0
|
|
|
|
|
Ending unused capacity
|
$
|
1,101.0
|
|
|
|
|
$
|
1,314.0
|
|
|
|
|
$
|
1,101.0
|
|
|
|
|
$
|
1,314.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
|
Percentage of total average managed receivables (quarterly
amounts are annualized).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings Highlights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended February 29 or 28
|
|
Years Ended February 29 or 28
|
|
(In millions except per share data)
|
|
2016
|
|
2015
|
|
Change
|
|
2016
|
|
2015
|
|
Change
|
|
Net earnings
|
|
$
|
141.0
|
|
$
|
143.1
|
|
(1.5
|
)%
|
|
$
|
623.4
|
|
$
|
597.4
|
|
4.4
|
%
|
|
Diluted weighted average shares outstanding
|
|
|
197.4
|
|
|
212.9
|
|
(7.3
|
)%
|
|
|
205.5
|
|
|
218.7
|
|
(6.0
|
)%
|
|
Net earnings per diluted share
|
|
$
|
0.71
|
|
$
|
0.67
|
|
6.0
|
%
|
|
$
|
3.03
|
|
$
|
2.73
|
|
11.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Planned Store Openings
We currently plan to open the following 15 stores in fiscal 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location
|
|
Television Market
|
|
Market Status
|
|
Planned Opening Date
|
|
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
|
|
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
|
|
Fremont, California
|
|
San Francisco
|
|
Existing
|
|
Q3 Fiscal 2017
|
|
Santa Rosa, California
|
|
San Francisco
|
|
Existing
|
|
Q3 Fiscal 2017
|
|
South Portland, Maine
|
|
Portland/Auburn
|
|
New
|
|
Q3 Fiscal 2017
|
|
Palmdale, California
|
|
Los Angeles
|
|
Existing
|
|
Q4 Fiscal 2017
|
|
Murrieta, California
|
|
Los Angeles
|
|
Existing
|
|
Q4 Fiscal 2017
|
|
Albany, New York
|
|
Albany
|
|
New
|
|
Q4 Fiscal 2017
|
|
|
|
|
|
|
|
|
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,
April 7, 2016. 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 24692282. 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 June 20, 2016. A telephone replay also will be available through
April 14, 2016, 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 24692282.
First Quarter Fiscal 2017 Earnings Release Date
We currently plan to release results for the first quarter ending May
31, 2016, on Tuesday, June 21, 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 investors.carmax.com
in June 2016.
About CarMax
CarMax, a member of the Fortune 500 and the S&P 500,
and on the Fortune 100 Best Companies to Work For®
list for 12 consecutive years, is the nation’s largest retailer of used
vehicles. Headquartered in Richmond, Va., CarMax currently operates 158
used car stores in 78 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 29, 2016, the company retailed 619,936 used vehicles and sold
394,437 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, expenses, capital expenditures 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 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 February 29 or 28
|
|
Years Ended February 29 or 28
|
|
(In thousands except per share data)
|
2016
|
|
% (1)
|
|
2015
|
|
% (1)
|
|
2016
|
|
% (1)
|
|
2015
|
|
% (1)
|
|
SALES AND OPERATING REVENUES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Used vehicle sales
|
$
|
3,087,560
|
|
83.3
|
|
$
|
2,899,499
|
|
82.5
|
|
$
|
12,439,401
|
|
82.1
|
|
$
|
11,674,520
|
|
81.8
|
|
Wholesale vehicle sales
|
|
506,072
|
|
13.7
|
|
|
491,942
|
|
14.0
|
|
|
2,188,267
|
|
14.4
|
|
|
2,049,133
|
|
14.4
|
|
Other sales and revenues
|
|
112,173
|
|
3.0
|
|
|
122,651
|
|
3.5
|
|
|
522,007
|
|
3.4
|
|
|
545,063
|
|
3.8
|
|
NET SALES AND OPERATING REVENUES
|
|
3,705,805
|
|
100.0
|
|
|
3,514,092
|
|
100.0
|
|
|
15,149,675
|
|
100.0
|
|
|
14,268,716
|
|
100.0
|
|
Cost of sales
|
|
3,216,540
|
|
86.8
|
|
|
3,038,255
|
|
86.5
|
|
|
13,130,915
|
|
86.7
|
|
|
12,381,189
|
|
86.8
|
|
GROSS PROFIT
|
|
489,265
|
|
13.2
|
|
|
475,837
|
|
13.5
|
|
|
2,018,760
|
|
13.3
|
|
|
1,887,527
|
|
13.2
|
|
CARMAX AUTO FINANCE INCOME
|
|
92,333
|
|
2.5
|
|
|
90,383
|
|
2.6
|
|
|
392,036
|
|
2.6
|
|
|
367,294
|
|
2.6
|
|
Selling, general and administrative expenses
|
|
333,860
|
|
9.0
|
|
|
330,009
|
|
9.4
|
|
|
1,351,935
|
|
8.9
|
|
|
1,257,725
|
|
8.8
|
|
Interest expense
|
|
11,784
|
|
0.3
|
|
|
2,184
|
|
0.1
|
|
|
36,358
|
|
0.2
|
|
|
24,473
|
|
0.2
|
|
Other expense
|
|
9,768
|
|
0.3
|
|
|
1,196
|
|
—
|
|
|
12,559
|
|
0.1
|
|
|
3,292
|
|
—
|
|
Earnings before income taxes
|
|
226,186
|
|
6.1
|
|
|
232,831
|
|
6.6
|
|
|
1,009,944
|
|
6.7
|
|
|
969,331
|
|
6.8
|
|
Income tax provision
|
|
85,159
|
|
2.3
|
|
|
89,693
|
|
2.6
|
|
|
386,516
|
|
2.6
|
|
|
371,973
|
|
2.6
|
|
NET EARNINGS
|
$
|
141,027
|
|
3.8
|
|
$
|
143,138
|
|
4.1
|
|
$
|
623,428
|
|
4.1
|
|
$
|
597,358
|
|
4.2
|
|
WEIGHTED AVERAGE COMMON SHARES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
195,764
|
|
|
|
|
209,655
|
|
|
|
|
203,275
|
|
|
|
|
215,617
|
|
|
|
Diluted
|
|
197,383
|
|
|
|
|
212,899
|
|
|
|
|
205,540
|
|
|
|
|
218,691
|
|
|
|
NET EARNINGS PER SHARE:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.72
|
|
|
|
$
|
0.68
|
|
|
|
$
|
3.07
|
|
|
|
$
|
2.77
|
|
|
|
Diluted
|
$
|
0.71
|
|
|
|
$
|
0.67
|
|
|
|
$
|
3.03
|
|
|
|
$
|
2.73
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
|
Percents are calculated as a percentage of net sales and
operating revenues and may not equal totals due to rounding.
|
|
|
|
|
|
|
|
|
CARMAX, INC. AND SUBSIDIARIES
|
|
CONSOLIDATED BALANCE SHEETS
|
|
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 29
|
|
February 28
|
|
(In thousands except share data)
|
|
2016
|
|
2015
|
|
ASSETS
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
37,394
|
|
|
$
|
27,606
|
|
|
Restricted cash from collections on auto loan receivables
|
|
343,829
|
|
|
294,122
|
|
|
Accounts receivable, net
|
|
132,171
|
|
|
137,690
|
|
|
Inventory
|
|
1,932,029
|
|
|
2,086,874
|
|
|
Other current assets
|
|
26,358
|
|
|
44,646
|
|
|
TOTAL CURRENT ASSETS
|
|
2,471,781
|
|
|
2,590,938
|
|
|
Auto loan receivables, net
|
|
9,536,892
|
|
|
8,435,504
|
|
|
Property and equipment, net
|
|
2,161,698
|
|
|
1,862,538
|
|
|
Deferred income taxes
|
|
161,862
|
|
|
175,738
|
|
|
Other assets
|
|
149,343
|
|
|
133,483
|
|
|
TOTAL ASSETS
|
|
$
|
14,481,576
|
|
|
$
|
13,198,201
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
Accounts payable
|
|
$
|
441,746
|
|
|
$
|
454,810
|
|
|
Accrued expenses and other current liabilities
|
|
245,909
|
|
|
250,307
|
|
|
Accrued income taxes
|
|
2,029
|
|
|
1,554
|
|
|
Short-term debt
|
|
428
|
|
|
785
|
|
|
Current portion of long-term debt
|
|
—
|
|
|
10,000
|
|
|
Current portion of finance and capital lease obligations
|
|
14,331
|
|
|
21,554
|
|
|
Current portion of non-recourse notes payable
|
|
300,750
|
|
|
258,163
|
|
|
TOTAL CURRENT LIABILITIES
|
|
1,005,193
|
|
|
997,173
|
|
|
Long-term debt, excluding current portion
|
|
715,000
|
|
|
300,000
|
|
|
Finance and capital lease obligations, excluding current portion
|
|
400,323
|
|
|
306,284
|
|
|
Non-recourse notes payable, excluding current portion
|
|
9,227,000
|
|
|
8,212,466
|
|
|
Other liabilities
|
|
229,274
|
|
|
225,493
|
|
|
TOTAL LIABILITIES
|
|
11,576,790
|
|
|
10,041,416
|
|
|
|
|
|
|
|
|
Commitments and contingent liabilities
|
|
|
|
|
|
SHAREHOLDERS’ EQUITY:
|
|
|
|
|
|
Common stock, $0.50 par value; 350,000,000 shares authorized;
194,712,234 and 208,869,688 shares issued and outstanding as of
February 29, 2016 and February 28, 2015, respectively
|
|
97,356
|
|
|
104,435
|
|
|
Capital in excess of par value
|
|
1,130,822
|
|
|
1,123,520
|
|
|
Accumulated other comprehensive loss
|
|
(70,196
|
)
|
|
(65,391
|
)
|
|
Retained earnings
|
|
1,746,804
|
|
|
1,994,221
|
|
|
TOTAL SHAREHOLDERS’ EQUITY
|
|
2,904,786
|
|
|
3,156,785
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
$
|
14,481,576
|
|
|
$
|
13,198,201
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CARMAX, INC. AND SUBSIDIARIES
|
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
(UNAUDITED)
|
|
|
|
|
|
|
|
Years Ended February 29 or 28
|
|
(In thousands)
|
|
2016
|
|
2015
|
|
OPERATING ACTIVITIES:
|
|
|
|
|
|
Net earnings
|
|
$
|
623,428
|
|
|
$
|
597,358
|
|
|
Adjustments to reconcile net earnings to net cash used in
operating activities:
|
|
|
|
|
|
Depreciation and amortization
|
|
137,360
|
|
|
115,173
|
|
|
Share-based compensation expense
|
|
51,077
|
|
|
81,880
|
|
|
Provision for loan losses
|
|
101,199
|
|
|
82,343
|
|
|
Provision for cancellation reserves
|
|
77,118
|
|
|
70,987
|
|
|
Deferred income tax provision (benefit)
|
|
17,237
|
|
|
(4,299
|
)
|
|
Loss on disposition of assets and other
|
|
13,136
|
|
|
3,852
|
|
|
Net decrease (increase) in:
|
|
|
|
|
|
Accounts receivable, net
|
|
5,519
|
|
|
(57,767
|
)
|
|
Inventory
|
|
154,845
|
|
|
(445,450
|
)
|
|
Other current assets
|
|
15,229
|
|
|
(16,947
|
)
|
|
Auto loan receivables, net
|
|
(1,202,587
|
)
|
|
(1,369,999
|
)
|
|
Other assets
|
|
(160
|
)
|
|
825
|
|
|
Net (decrease) increase in:
|
|
|
|
|
|
Accounts payable, accrued expenses and other current liabilities
and accrued income taxes
|
|
(55,187
|
)
|
|
51,960
|
|
|
Other liabilities
|
|
(87,107
|
)
|
|
(78,046
|
)
|
|
NET CASH USED IN OPERATING ACTIVITIES
|
|
(148,893
|
)
|
|
(968,130
|
)
|
|
INVESTING ACTIVITIES:
|
|
|
|
|
|
Capital expenditures
|
|
(315,584
|
)
|
|
(309,817
|
)
|
|
Proceeds from sales of assets
|
|
1,542
|
|
|
5,869
|
|
|
Increase in restricted cash from collections on auto loan receivables
|
|
(49,707
|
)
|
|
(34,823
|
)
|
|
Increase in restricted cash in reserve accounts
|
|
(12,264
|
)
|
|
(16,556
|
)
|
|
Release of restricted cash from reserve accounts
|
|
8,357
|
|
|
6,346
|
|
|
Purchases of money market securities, net
|
|
(6,168
|
)
|
|
(8,604
|
)
|
|
Purchases of trading securities
|
|
(5,295
|
)
|
|
(3,814
|
)
|
|
Sales of trading securities
|
|
324
|
|
|
655
|
|
|
NET CASH USED IN INVESTING ACTIVITIES
|
|
(378,795
|
)
|
|
(360,744
|
)
|
|
FINANCING ACTIVITIES:
|
|
|
|
|
|
(Decrease) increase in short-term debt, net
|
|
(357
|
)
|
|
203
|
|
|
Proceeds from issuances of long-term debt
|
|
2,057,100
|
|
|
985,000
|
|
|
Payments on long-term debt
|
|
(1,652,100
|
)
|
|
(675,000
|
)
|
|
Cash paid for debt issuance costs
|
|
(3,104
|
)
|
|
(1,190
|
)
|
|
Payments on finance and capital lease obligations
|
|
(16,417
|
)
|
|
(18,243
|
)
|
|
Issuances of non-recourse notes payable
|
|
9,553,805
|
|
|
7,783,000
|
|
|
Payments on non-recourse notes payable
|
|
(8,496,684
|
)
|
|
(6,560,815
|
)
|
|
Repurchase and retirement of common stock
|
|
(983,941
|
)
|
|
(924,328
|
)
|
|
Equity issuances
|
|
47,038
|
|
|
89,810
|
|
|
Excess tax benefits from share-based payment arrangements
|
|
32,136
|
|
|
50,142
|
|
|
NET CASH PROVIDED BY FINANCING ACTIVITIES
|
|
537,476
|
|
|
728,579
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
9,788
|
|
|
(600,295
|
)
|
|
Cash and cash equivalents at beginning of year
|
|
27,606
|
|
|
627,901
|
|
|
CASH AND CASH EQUIVALENTS AT END OF YEAR
|
|
$
|
37,394
|
|
|
$
|
27,606
|
|
|
|
|
|
|
|
|
|
|
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20160407005357/en/
Source: CarMax, Inc.