CARMAX REPORTS RECORD FISCAL YEAR
AND FOURTH QUARTER RESULTS
Richmond, Va., March 31, 2011 – CarMax, Inc. (NYSE:KMX) today reported record results for the fourth quarter and fiscal year ended February 28, 2011.
| § | Net sales and operating revenues increased 23% to $2.25 billion from $1.83 billion in the fourth quarter of last year. For the fiscal year, net sales and operating revenues increased 20% to $8.98 billion from $7.47 billion in fiscal 2010. |
| § | Comparable store used unit sales increased 12% for the fourth quarter and 10% for the fiscal year. |
| § | Total used unit sales rose 14% in the fourth quarter and 11% in the fiscal year. |
| § | For the fourth quarter, net earnings increased 19% to $89.5 million, or $0.39 per diluted share, in fiscal 2011 compared with $75.4 million, or $0.33 per diluted share, in fiscal 2010. |
| Ø | Net earnings for the prior year’s fourth quarter were increased by $0.07 per share for CarMax Auto Finance (CAF) favorable adjustments primarily related to loans originated in previous periods. |
| § | For the fiscal year, net earnings increased 35% to $380.9 million, or $1.67 per share, in fiscal 2011 compared with $281.7 million, or $1.26 per diluted share, in fiscal 2010. |
| Ø | Net earnings for the prior year were increased by $0.07 per share for CAF favorable adjustments related to loans originated in previous years. |
Fourth Quarter Business Performance Review
Sales. “We are pleased to report strong fourth quarter and fiscal year results,” said Tom Folliard, president and chief executive officer. “Comparable store used unit sales increased 12% in the fourth quarter, despite facing the toughest comparison of the year.” The increase in comparable store sales primarily reflected a continued rebound in customer traffic. Sales execution also remained strong.
Wholesale unit sales increased 41% compared with the fourth quarter of fiscal 2010. The improvement primarily reflected a substantial increase in appraisal traffic. We believe that our appraisal traffic benefited from the recent improvement in new car industry sales. Wholesale sales also benefited from our higher appraisal buy rate. We have achieved a year-over-year improvement in our appraisal buy rate for eight consecutive quarters.
Other sales and revenues increased 19% compared with the prior year’s fourth quarter, fueled by increases in both extended service plan (ESP) revenues and net third-party finance fees. ESP revenues included a benefit of $0.01 per share related to a slow down in the rate of ESP cancellations. While the percent of sales financed by our subprime finance providers was generally consistent with last year’s fourth quarter, the overall percent of sales financed by third-parties increased. This change in third-party originations and the resulting increase in net finance fees reflected, in part, the effect of current arrangements with these providers to purchase a portion of the loans that previously would have been originated by CAF.
Gross Profit. Total gross profit increased 21% to $320.7 million from $265.2 million in the fourth quarter of fiscal 2010, primarily reflecting the increases in used and wholesale unit sales, as well as an improvement in total gross profit dollars per retail unit. Total gross profit per retail unit increased $181 to $3,146 per unit in the current quarter from $2,965 per unit in the corresponding prior year quarter.
Used vehicle gross profit per unit increased to $2,096 in the current quarter from $2,067 in the prior year quarter. As of the end of fiscal 2011, we estimate our efforts to eliminate waste from our reconditioning processes in recent years have allowed us to achieve a sustainable reduction in average reconditioning costs of approximately $250 per vehicle, on a cumulative basis.
Wholesale gross profit per unit increased to $956 in the current quarter, compared with $936 in the fourth quarter of last year. The continued strength of our wholesale gross profits reflected the strong demand for older, higher mileage vehicles, which are the mainstay of our auctions, as well as the continued strong dealer attendance and resulting high dealer-to-car ratios at our auctions.
CarMax Auto Finance. Effective March 1, 2010, we adopted new accounting standards that affected the timing of the recognition of CAF income. Beginning in fiscal 2011, CAF income no longer includes a gain on the sale of loans through securitization transactions, but instead primarily reflects the interest and fee income generated by the auto loan receivables less interest expense, direct CAF expenses and a provision for estimated loan losses.
CAF income was $54.1 million compared with $58.9 million in last year’s fourth quarter. In the prior year period, CAF income was increased by adjustments totaling $26.6 million related to loans originated in previous fiscal periods.
SG&A. Selling, general and administrative expenses increased 15% to $233.5 million from $202.2 million in the prior year’s fourth quarter. The increase in SG&A primarily reflected increases in sales commissions and other variable costs associated with the growth in unit sales, and higher advertising expense, as well as costs associated with our resumption of store growth. The SG&A ratio improved to 10.4% in the current year’s quarter compared with 11.0% in the prior’s year quarter, reflecting the leverage associated with the increases in both unit sales and average selling prices.
Income Taxes. The income tax provision for the current year’s fourth quarter included a benefit of $0.01 per share related to the favorable adjustments relating to prior years’ tax reserves.
Results. “We are extremely pleased to deliver record profits this year, supported by the solid rebound in sales and traffic and the returns on our continuing efforts to develop associates, drive execution and discover efficiencies,” said Folliard. “For the fiscal year, our data indicates that we increased our share of the late-model used vehicle market by approximately 7%. We believe that our ability to consistently grow market share, regardless of the economic backdrop, is a testament to the strength of our consumer offer, the skill of our associates and the preference for our brand.”
Supplemental Financial Information
Sales Components
(In millions) | | Three Months Ended February 28 (1) | | | Fiscal Year Ended February 28 (1) | |
| | | 2011 | | | 2010 | | | Change | | | 2011 | | | 2010 | | | Change | |
| Used vehicle sales | | $ | 1,799.9 | | | $ | 1,529.3 | | | | 17.7 | % | | $ | 7,210.0 | | | $ | 6,192.3 | | | | 16.4 | % |
| New vehicle sales | | | 48.9 | | | | 36.6 | | | | 33.8 | % | | | 198.5 | | | | 186.5 | | | | 6.5 | % |
| Wholesale vehicle sales | | | 335.2 | | | | 209.5 | | | | 60.0 | % | | | 1,301.7 | | | | 844.9 | | | | 54.1 | % |
| Other sales and revenues: | | | | | | | | | | | | | | | | | | | | | | | | |
Extended service plan revenues | | | 47.3 | | | | 39.9 | | | | 18.6 | % | | | 173.8 | | | | 144.5 | | | | 20.3 | % |
Service department sales | | | 23.3 | | | | 23.5 | | | | (1.0 | )% | | | 100.6 | | | | 101.1 | | | | (0.5 | )% |
Third-party finance fees, net | | | (1.9 | ) | | | (5.5 | ) | | | 64.8 | % | | | (9.1 | ) | | | 0.9 | | | nm | |
| Total other sales and revenues | | | 68.6 | | | | 57.9 | | | | 18.5 | % | | | 265.3 | | | | 246.6 | | | | 7.6 | % |
| Net sales and operating revenues | | $ | 2,252.6 | | | $ | 1,833.2 | | | | 22.9 | % | | $ | 8,975.6 | | | $ | 7,470.2 | | | | 20.2 | % |
| (1) | Percent calculations and amounts shown are based on amounts presented on the attached consolidated statements of earnings and may not sum due to rounding. |
nm = not meaningful
Retail Vehicle Sales Changes
| | | Three Months Ended February 28 | | | Fiscal Year Ended February 28 | |
| | | 2011 | | | 2010 | | | 2011 | | | 2010 | |
| Comparable store vehicle sales: | | | | | | | | | | | | |
Used vehicle units | | | 12 | % | | | 12 | % | | | 10 | % | | | 1 | % |
New vehicle units | | | 30 | % | | | (18 | )% | | | 5 | % | | | (29 | )% |
Total units | | | 13 | % | | | 11 | % | | | 10 | % | | | 0 | % |
| | | | | | | | | | | | | | | | | |
Used vehicle dollars | | | 16 | % | | | 23 | % | | | 15 | % | | | 6 | % |
New vehicle dollars | | | 37 | % | | | (18 | )% | | | 7 | % | | | (29 | )% |
Total dollars | | | 17 | % | | | 22 | % | | | 15 | % | | | 5 | % |
| | | | | | | | | | | | | | | | | |
| Total vehicle sales: | | | | | | | | | | | | | | | | |
Used vehicle units | | | 14 | % | | | 13 | % | | | 11 | % | | | 3 | % |
New vehicle units | | | 27 | % | | | (18 | )% | | | 5 | % | | | (29 | )% |
Total units | | | 14 | % | | | 13 | % | | | 11 | % | | | 2 | % |
| | | | | | | | | | | | | | | | | |
Used vehicle dollars | | | 18 | % | | | 24 | % | | | 16 | % | | | 9 | % |
New vehicle dollars | | | 34 | % | | | (18 | )% | | | 6 | % | | | (29 | )% |
Total dollars | | | 18 | % | | | 23 | % | | | 16 | % | | | 7 | % |
Retail Vehicle Sales Mix
| | | Three Months Ended February 28 | | | Fiscal Year Ended February 28 | |
| | | 2011 | | | 2010 | | | 2011 | | | 2010 | |
| Vehicle units: | | | | | | | | | | | | |
Used vehicles | | | 98 | % | | | 98 | % | | | 98 | % | | | 98 | % |
New vehicles | | | 2 | | | | 2 | | | | 2 | | | | 2 | |
Total | | | 100 | % | | | 100 | % | | | 100 | % | | | 100 | % |
| | | | | | | | | | | | | | | | | |
| Vehicle dollars: | | | | | | | | | | | | | | | | |
Used vehicles | | | 97 | % | | | 98 | % | | | 97 | % | | | 97 | % |
New vehicles | | | 3 | | | | 2 | | | | 3 | | | | 3 | |
Total | | | 100 | % | | | 100 | % | | | 100 | % | | | 100 | % |
Unit Sales
| | | Three Months Ended February 28 | | | Fiscal Year Ended February 28 | |
| | | 2011 | | | 2010 | | | 2011 | | | 2010 | |
| Used vehicles | | | 99,969 | | | | 87,924 | | | | 396,181 | | | | 357,129 | |
| New vehicles | | | 1,953 | | | | 1,535 | | | | 8,231 | | | | 7,851 | |
| Wholesale vehicles | | | 65,229 | | | | 46,340 | | | | 263,061 | | | | 197,382 | |
Average Selling Prices
| | | Three Months Ended February 28 | | | Fiscal Year Ended February 28 | |
| | | 2011 | | | 2010 | | | 2011 | | | 2010 | |
| Used vehicles | | $ | 17,862 | | | $ | 17,232 | | | $ | 18,019 | | | $ | 17,152 | |
| New vehicles | | $ | 24,911 | | | $ | 23,681 | | | $ | 23,989 | | | $ | 23,617 | |
| Wholesale vehicles | | $ | 5,004 | | | $ | 4,391 | | | $ | 4,816 | | | $ | 4,155 | |
Selected Operating Ratios
(In millions) | | Three Months Ended February 28 | | | Fiscal Year Ended February 28 | |
| | | 2011 | | | | % | (1) | | | 2010 | | | | % | (1) | | | 2011 | | | | % | (1) | | | 2010 | | | | % | (1) |
| Net sales and operating revenues | | $ | 2,252.6 | | | | 100.0 | % | | $ | 1,833.2 | | | | 100.0 | % | | $ | 8,975.6 | | | | 100.0 | % | | $ | 7,470.2 | | | | 100.0 | % |
Gross profit | | $ | 320.7 | | | | 14.2 | % | | $ | 265.2 | | | | 14.5 | % | | $ | 1,301.2 | | | | 14.5 | % | | $ | 1,098.9 | | | | 14.7 | % |
| CarMax Auto Finance income | | $ | 54.1 | | | | 2.4 | % | | $ | 58.9 | | | | 3.2 | % | | $ | 220.0 | | | | 2.5 | % | | $ | 175.2 | | | | 2.3 | % |
| Selling, general, and administrative | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
expenses | | $ | 233.5 | | | | 10.4 | % | | $ | 202.2 | | | | 11.0 | % | | $ | 905.1 | | | | 10.1 | % | | $ | 818.7 | | | | 11.0 | % |
Operating profit (EBIT) (2) | | $ | 141.3 | | | | 6.3 | % | | $ | 121.9 | | | | 6.7 | % | | $ | 616.1 | | | | 6.9 | % | | $ | 455.4 | | | | 6.1 | % |
Net earnings | | $ | 89.5 | | | | 4.0 | % | | $ | 75.4 | | | | 4.1 | % | | $ | 380.9 | | | | 4.2 | % | | $ | 281.7 | | | | 3.8 | % |
| (1) | Calculated as the ratio of the applicable amount to net sales and operating revenues. |
| (2) | Operating profit equals earnings before interest and income taxes. |
Gross Profit
(In millions) | | Three Months Ended February 28 | | | Fiscal Year Ended February 28 | |
| | | 2011 | | | 2010 | | | Change | | | 2011 | | | 2010 | | | Change | |
| Used vehicle gross profit | | $ | 209.5 | | | $ | 181.7 | | | | 15.3 | % | | $ | 854.0 | | | $ | 739.9 | | | | 15.4 | % |
| New vehicle gross profit | | | 1.1 | | | | 1.1 | | | | 0.4 | % | | | 5.4 | | | | 6.7 | | | | (19.5 | )% |
| Wholesale vehicle gross profit | | | 62.4 | | | | 43.4 | | | | 43.8 | % | | | 238.8 | | | | 171.5 | | | | 39.3 | % |
| Other gross profit | | | 47.6 | | | | 39.0 | | | | 22.0 | % | | | 203.0 | | | | 180.8 | | | | 12.2 | % |
| Total gross profit | | $ | 320.7 | | | $ | 265.2 | | | | 20.9 | % | | $ | 1,301.2 | | | $ | 1,098.9 | | | | 18.4 | % |
Gross Profit per Unit
| | | Three Months Ended February 28 | | | Fiscal Year Ended February 28 | |
| | | 2011 | | | 2010 | | | 2011 | | | 2010 | |
| | | $/unit (1) | | | | % | (2) | | $/unit (1) | | | | % | (2) | | $/unit (1) | | | | % | (2) | | $/unit (1) | | | | % | (2) |
| Used vehicle gross profit | | $ | 2,096 | | | | 11.6 | % | | $ | 2,067 | | | | 11.9 | % | | $ | 2,156 | | | | 11.8 | % | | $ | 2,072 | | | | 11.9 | % |
| New vehicle gross profit | | $ | 578 | | | | 2.3 | % | | $ | 733 | | | | 3.1 | % | | $ | 659 | | | | 2.7 | % | | $ | 858 | | | | 3.6 | % |
| Wholesale vehicle gross profit | | $ | 956 | | | | 18.6 | % | | $ | 936 | | | | 20.7 | % | | $ | 908 | | | | 18.3 | % | | $ | 869 | | | | 20.3 | % |
| Other gross profit | | $ | 467 | | | | 69.4 | % | | $ | 436 | | | | 67.4 | % | | $ | 502 | | | | 76.5 | % | | $ | 495 | | | | 73.3 | % |
| Total gross profit | | $ | 3,146 | | | | 14.2 | % | | $ | 2,965 | | | | 14.5 | % | | $ | 3,218 | | | | 14.5 | % | | $ | 3,011 | | | | 14.7 | % |
| (1) | Calculated as category gross profit divided by its respective units sold, except the other and total categories, which are divided by total retail units sold. |
| (2) | Calculated as a percentage of its respective sales or revenue. |
CAF Income
(In millions) | | Three Months Ended February 28 | | | Fiscal Year Ended February 28 | |
| | | 2011 (1) | | | 2010 | | | 2011 (1) | | | 2010 | |
Total managed portfolio income | | $ | 104.9 | | | $ | 28.8 | | | $ | 421.6 | | | $ | 110.4 | |
| | | | | | | | | | | | | | | | | |
| Gain: | | | | | | | | | | | | | | | | |
Gain on sales of loans originated and sold | | | -- | | | | 15.8 | | | | -- | | | | 83.0 | |
Other gains | | | 0.7 | | | | 26.6 | | | | 5.0 | | | | 26.7 | |
Total gain | | | 0.7 | | | | 42.4 | | | | 5.0 | | | | 109.7 | |
| | | | | | | | | | | | | | | | | |
| Expenses: | | | | | | | | | | | | | | | | |
Interest expense | | | 30.3 | | | | -- | | | | 133.8 | | | | -- | |
Provision for loan losses | | | 9.3 | | | | -- | | | | 27.7 | | | | -- | |
Direct CAF expenses | | | 11.9 | | | | 12.3 | | | | 45.1 | | | | 44.9 | |
Total expenses | | | 51.5 | | | | 12.3 | | | | 206.6 | | | | 44.9 | |
| | | | | | | | | | | | | | | | | |
CarMax Auto Finance income | | $ | 54.1 | | | $ | 58.9 | | | $ | 220.0 | | | $ | 175.2 | |
| | | | | | | | | | | | | | | | | |
Average managed receivables, principal only | | $ | 4,305.9 | | | $ | 4,099.3 | | | $ | 4,229.9 | | | $ | 4,057.2 | |
Ending allowance for loan losses | | $ | 38.9 | | | | -- | | | $ | 38.9 | | | | -- | |
| | | | | | | | | | | | | | | | | |
Ending receivables funded in the warehouse facilities | | $ | 943.0 | | | $ | 331.0 | | | $ | 943.0 | | | $ | 331.0 | |
Ending unused warehouse facility capacity | | $ | 657.0 | | | $ | 869.0 | | | $ | 657.0 | | | $ | 869.0 | |
| (1) | Reflects the adoption of ASU Nos. 2009-16 and 2009-17 effective March 1, 2010. |
Earnings Highlights
(In millions except per share data) | | Three Months Ended February 28 | | | Fiscal Year Ended February 28 | |
| | | 2011 | | | 2010 | | | Change | | | 2011 | | | 2010 | | | Change | |
| Net earnings | | $ | 89.5 | | | $ | 75.4 | | | | 18.8 | % | | $ | 380.9 | | | $ | 281.7 | | | | 35.2 | % |
| Diluted weighted average shares outstanding | | | 229.7 | | | | 224.9 | | | | 2.1 | % | | | 227.6 | | | | 222.2 | | | | 2.4 | % |
| Net earnings per share | | $ | 0.39 | | | $ | 0.33 | | | | 18.2 | % | | $ | 1.67 | | | $ | 1.26 | | | | 32.5 | % |
Expectations for Fiscal Year Ending February 29, 2012
CarMax Auto Finance. In fiscal 2011, CAF income significantly exceeded our initial expectations due to a combination of factors. The spread between consumer rates and funding costs remained at wide levels relative to historical averages for the entire year, while we had anticipated a reduction in this spread to more normal levels over the course of the fiscal year. In addition, better-than-expected loss experience resulted in a provision for loan losses that was significantly lower than we had anticipated. The provision for loan losses was 0.7% of average managed receivables in fiscal 2011.
To help investors understand the effects of last year’s accounting transition, we are again providing one-time guidance on CAF income at the outset of the fiscal year. We currently estimate CAF income will be in the range of $205 million to $235 million in fiscal 2012. We expect a moderate reduction in the spread between consumer rates and our funding costs over the course of the year, although not back to historical averages. In addition, we expect the provision for loan losses to be approximately 1% of average managed receivables, which would represent an increase compared with fiscal 2011.
A number of factors could affect the actual amount of CAF income in fiscal 2012, including changes in consumer interest rates and/or funding costs related to new loan originations, changes in loan loss experience, changes in the volume of CAF loan originations and potential regulatory changes. We do not plan to update or provide additional CAF income guidance on a going-forward basis.
Fiscal 2012 Planned Store Openings
Location | Television Market | Market Status | Planned Opening Date |
| Baton Rouge, Louisiana | Baton Rouge | New | Q1 Fiscal 2012 |
| Lexington, Kentucky | Lexington | New | Q1 Fiscal 2012 |
| Escondido, California | San Diego | Existing | Q2 Fiscal 2012 |
| North Attleborough, Massachusetts | Providence | New | Q3 Fiscal 2012 |
| Chattanooga, Tennessee | Chattanooga | New | Q4 Fiscal 2012 |
Normal construction, permitting or other scheduling delays could shift the opening dates of any of these stores into a later period.
We currently estimate capital expenditures will total approximately $225 million in fiscal 2012. Compared with the $76.6 million of capital spending in fiscal 2011, the increase in planned fiscal 2012 expenditures primarily reflects real estate acquisitions and construction costs associated with store growth. We incurred no material construction costs in fiscal 2011 related to the three stores opened in the current year. These stores were built in fiscal 2009, but we chose not to open them until economic conditions improved. We expect fiscal 2012 capital spending will include some costs for stores planned to be opened in the first half of fiscal 2013. We currently expect to open between eight and ten stores in fiscal 2013.
Conference Call Information
We will host a conference call for investors at 9:00 a.m. ET today, March 31, 2011. Domestic investors may access the call at 1-888-298-3261 (international callers dial 1-706-679-7457). The conference I.D. is 97133253. A live webcast of the call will be available on our investor information home page at investor.carmax.com and at www.streetevents.com.
A webcast replay of the call will be available at investor.carmax.com beginning at approximately 1:00 p.m. ET on March 31, 2011, through June 21, 2011. A telephone replay also will be available through April 7, 2011, and may be accessed by dialing 1-800-642-1687 (international callers dial 1-706-645-9291). The conference I.D. is 97133253.
First Quarter Fiscal 2012 Earnings Release Date
We currently plan to release first quarter fiscal 2012 sales and earnings on Wednesday, June 22, 2011, before the opening of the New York Stock Exchange. We will 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 investor.carmax.com in early June 2011.
About CarMax
CarMax, a member of the Fortune 500 and the S&P 500, and one of the Fortune 2011 “100 Best Companies to Work For,” is the nation’s largest retailer of used cars. Headquartered in Richmond, Va., CarMax currently operates 103 used car superstores in 49 markets. The CarMax consumer offer is structured around four customer benefits: low, no-haggle prices; a broad selection; high quality vehicles; and customer-friendly service. During the twelve months ended February 28, 2011, the company retailed 396,181 used cars and sold 263,061 wholesale vehicles at our in-store auctions. For more information, access the CarMax website at www.carmax.com.
Forward-Looking Statements
We caution readers that the statements contained in this release about our future business plans, operations, opportunities or prospects, including without limitation any statements or factors regarding expected sales, margins or earnings, are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. 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 general or regional U.S. economic conditions. |
| · | Changes in the availability or cost of capital and working capital financing, including the availability and cost of financing auto loan receivables. |
| · | Changes in consumer credit availability related to our third-party financing providers. |
| · | Changes in the competitive landscape within our industry. |
| · | Significant changes in retail prices for used and new vehicles. |
| · | A reduction in the availability of or access to sources of inventory. |
| · | Factors related to the regulatory and legislative environment in which we operate. |
| · | The loss of key employees from our store, regional or corporate management teams. |
| · | The failure of key information systems. |
| · | The effect of new accounting requirements or changes to U.S. generally accepted accounting principles. |
| · | Security breaches or other events that result in the misappropriation, loss or other unauthorized disclosure of confidential customer information. |
| · | 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 effect of various litigation matters. |
| · | Adverse conditions affecting one or more automotive manufacturers. |
| · | The occurrence of severe weather events. |
| · | Factors related to the seasonal fluctuations in our business. |
| · | Factors related to the geographic concentration of our superstores. |
For more details on factors that could affect expectations, see our Annual Report on Form 10-K for the fiscal year ended February 28, 2010, and our quarterly or current reports as filed with or furnished to the Securities and Exchange Commission. Our filings are publicly available on our investor information home page at investor.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. 4287. We disclaim any intent or obligation to update our forward-looking statements.
Contacts:
Investors and Financial Media:
Katharine Kenny, Vice President, Investor Relations, (804) 935-4591
Celeste Gunter, Manager, Investor Relations, (804) 935-4597
General Media:
Laura Donahue, Vice President, Public Affairs, (804) 747-0422, ext. 4434
Trina Lee, Director, Public Relations (804) 747-0422, ext. 4197
CARMAX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
(In thousands except per share data)
| | | Three Months Ended February 28 | | | Fiscal Year Ended February 28 | |
| | | 2011 (1) | | | | % | (2) | | | 2010 | | | | % | (2) | | | 2011 (1) | | | | % | (2) | | | 2010 | | | | % | (2) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Sales and operating revenues: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Used vehicle sales | | $ | 1,799,884 | | | | 79.9 | | | $ | 1,529,310 | | | | 83.4 | | | $ | 7,210,017 | | | | 80.3 | | | $ | 6,192,278 | | | | 82.9 | |
New vehicle sales | | | 48,906 | | | | 2.2 | | | | 36,564 | | | | 2.0 | | | | 198,532 | | | | 2.2 | | | | 186,481 | | | | 2.5 | |
Wholesale vehicle sales | | | 335,208 | | | | 14.9 | | | | 209,474 | | | | 11.4 | | | | 1,301,703 | | | | 14.5 | | | | 844,868 | | | | 11.3 | |
Other sales and revenues | | | 68,635 | | | | 3.0 | | | | 57,897 | | | | 3.2 | | | | 265,302 | | | | 3.0 | | | | 246,566 | | | | 3.3 | |
| Net sales and operating revenues | | | 2,252,633 | | | | 100.0 | | | | 1,833,245 | | | | 100.0 | | | | 8,975,554 | | | | 100.0 | | | | 7,470,193 | | | | 100.0 | |
Cost of sales | | | 1,931,981 | | | | 85.8 | | | | 1,568,024 | | | | 85.5 | | | | 7,674,326 | | | | 85.5 | | | | 6,371,323 | | | | 85.3 | |
Gross profit | | | 320,652 | | | | 14.2 | | | | 265,221 | | | | 14.5 | | | | 1,301,228 | | | | 14.5 | | | | 1,098,870 | | | | 14.7 | |
| CarMax Auto Finance income | | | 54,139 | | | | 2.4 | | | | 58,917 | | | | 3.2 | | | | 219,983 | | | | 2.5 | | | | 175,217 | | | | 2.3 | |
| Selling, general and administrative | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
expenses | | | 233,456 | | | | 10.4 | | | | 202,204 | | | | 11.0 | | | | 905,091 | | | | 10.1 | | | | 818,691 | | | | 11.0 | |
Interest expense | | | 824 | | | | -- | | | | 372 | | | | -- | | | | 3,110 | | | | -- | | | | 3,460 | | | | -- | |
Interest income | | | 100 | | | | -- | | | | 142 | | | | -- | | | | 480 | | | | -- | | | | 560 | | | | -- | |
| Earnings before income taxes | | | 140,611 | | | | 6.2 | | | | 121,704 | | | | 6.6 | | | | 613,490 | | | | 6.8 | | | | 452,496 | | | | 6.1 | |
Income tax provision | | | 51,101 | | | | 2.3 | | | | 46,344 | | | | 2.5 | | | | 232,612 | | | | 2.6 | | | | 170,828 | | | | 2.3 | |
Net earnings | | $ | 89,510 | | | | 4.0 | | | $ | 75,360 | | | | 4.1 | | | $ | 380,878 | | | | 4.2 | | | $ | 281,668 | | | | 3.8 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Weighted average common shares: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Basic | | | 224,801 | | | | | | | | 221,197 | | | | | | | | 223,449 | | | | | | | | 219,527 | | | | | |
Diluted | | | 229,656 | | | | | | | | 224,927 | | | | | | | | 227,601 | | | | | | | | 222,234 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Net earnings per share: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Basic | | $ | 0.40 | | | | | | | $ | 0.34 | | | | | | | $ | 1.70 | | | | | | | $ | 1.27 | | | | | |
Diluted | | $ | 0.39 | | | | | | | $ | 0.33 | | | | | | | $ | 1.67 | | | | | | | $ | 1.26 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(1) Reflects the adoption of ASU Nos. 2009-16 and 2009-17 effective March 1, 2010. | |
(2) Percents are calculated as a percentage of net sales and operating revenues and may not equal totals due to rounding. | |
CarMax, Inc.
Page 10 of 11
CARMAX, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In thousands)
| | | February 28 2011 (1) | | | February 28 2010 | |
| ASSETS | | | | | | |
| Current assets: | | | | | | |
| Cash and cash equivalents | | $ | 41,121 | | | $ | 18,278 | |
| Restricted cash from collections on auto loan receivables | | | 161,052 | | | | -- | |
| Accounts receivable, net | | | 119,597 | | | | 99,434 | |
| Auto loan receivables held for sale | | | -- | | | | 30,578 | |
| Retained interest in securitized receivables | | | -- | | | | 552,377 | |
| Inventory | | | 1,049,477 | | | | 843,133 | |
| Deferred income taxes | | | 5,191 | | | | 5,595 | |
| Other current assets | | | 33,660 | | | | 7,017 | |
| | | | | | | | | |
| Total current assets | | | 1,410,098 | | | | 1,556,412 | |
| | | | | | | | | |
| Auto loan receivables, net | | | 4,320,575 | | | | -- | |
| Property and equipment, net | | | 920,045 | | | | 893,453 | |
| Deferred income taxes | | | 92,278 | | | | 57,234 | |
| Other assets | | | 96,913 | | | | 49,092 | |
| | | | | | | | | |
| TOTAL ASSETS | | $ | 6,839,909 | | | $ | 2,556,191 | |
| | | | | | | | | |
| LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | |
| Current liabilities: | | | | | | | | |
| Accounts payable | | $ | 269,763 | | | $ | 253,267 | |
| Accrued expenses and other current liabilities | | | 103,389 | | | | 94,557 | |
| Accrued income taxes | | | 772 | | | | 6,327 | |
| Short-term debt | | | 1,002 | | | | 883 | |
| Current portion of long-term debt | | | 772 | | | | 122,317 | |
| Current portion of non-recourse notes payable | | | 132,519 | | | | -- | |
| | | | | | | | | |
| Total current liabilities | | | 508,217 | | | | 477,351 | |
| | | | | | | | | |
| Long-term debt, excluding current portion | | | 28,350 | | | | 27,371 | |
| Non-recourse notes payable, excluding current portion | | | 3,881,142 | | | | -- | |
| Other liabilities | | | 130,570 | | | | 117,887 | |
| | | | | | | | | |
| TOTAL LIABILITIES | | | 4,548,279 | | | | 622,609 | |
| | | | | | | | | |
| TOTAL SHAREHOLDERS’ EQUITY | | | 2,291,630 | | | | 1,933,582 | |
| | | | | | | | | |
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | | $ | 6,839,909 | | | $ | 2,556,191 | |
| | | | | | | | | |
| (1) | Reflects the adoption of ASU Nos. 2009-16 and 2009-17 effective March 1, 2010. Pursuant to these pronouncements, we recognize (a) all transfers of auto loan receivables into term securitizations and (b) transfers of auto loan receivables into our warehouse facilities on or after March 1, 2010, as secured borrowings. |
CarMax, Inc.
Page 11 of 11
CARMAX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
| | | Fiscal Year Ended February 28 | |
| | | 2011 | | | 2010 | |
Operating Activities: | | | | | | |
| Net earnings | | $ | 380,878 | | | $ | 281,668 | |
| Adjustments to reconcile net earnings to net cash | | | | | | | | |
(used in) provided by operating activities: | | | | | | | | |
Depreciation and amortization | | | 59,421 | | | | 58,328 | |
Share-based compensation expense | | | 43,606 | | | | 37,858 | |
Provision for loan losses | | | 27,749 | | | | -- | |
Loss on disposition of assets | | | 1,143 | | | | 372 | |
Deferred income tax provision | | | 19,393 | | | | 29,761 | |
Impairment of long-lived assets | | | -- | | | | 2,055 | |
Net (increase) decrease in: | | | | | | | | |
Accounts receivable, net | | | (40,538 | ) | | | (23,558 | ) |
Auto loan receivables held for sale, net | | | -- | | | | (20,830 | ) |
Retained interest in securitized receivables | | | 43,746 | | | | (204,115 | ) |
Inventory | | | (206,344 | ) | | | (139,976 | ) |
Other current assets | | | (27,403 | ) | | | 3,095 | |
Auto loan receivables, net | | | (304,729 | ) | | | -- | |
Other assets | | | (6,790 | ) | | | 917 | |
Net (decrease) increase in: | | | | | | | | |
Accounts payable, accrued expenses and other current | | | | | | | | |
liabilities and accrued income taxes | | | (8,715 | ) | | | 33,818 | |
Other liabilities | | | 1,385 | | | | (9,103 | ) |
| Net cash (used in) provided by operating activities | | | (17,198 | ) | | | 50,290 | |
| | | | | | | | | |
Investing Activities: | | | | | | | | |
| Capital expenditures | | | (76,580 | ) | | | (22,434 | ) |
| Proceeds from sales of assets | | | 8 | | | | 662 | |
| Insurance proceeds related to damaged property | | | -- | | | | 447 | |
| Decrease in restricted cash from collections on auto loan receivables | | | 1,556 | | | | -- | |
| Increase in restricted cash in reserve accounts | | | (12,631 | ) | | | -- | |
| Releases of restricted cash from reserve accounts | | | 11,434 | | | | -- | |
| Sales (purchases) of money market securities, net | | | 4,001 | | | | (2,196 | ) |
| Sales of investments available-for-sale | | | -- | | | | 2,200 | |
| Net cash used in investing activities | | | (72,212 | ) | | | (21,321 | ) |
| | | | | | | | | |
Financing Activities: | | | | | | | | |
| Increase in short-term debt, net | | | 119 | | | | 5 | |
| Issuances of long-term debt | | | 243,300 | | | | 606,500 | |
| Payments on long-term debt | | | (365,605 | ) | | | (792,981 | ) |
| Issuances of non-recourse notes payable | | | 3,348,000 | | | | -- | |
| Payments on non-recourse notes payable | | | (3,160,749 | ) | | | -- | |
| Equity issuances, net | | | 38,277 | | | | 31,307 | |
| Excess tax benefits from share-based payment arrangements | | | 8,911 | | | | 3,881 | |
| Net cash provided by (used in) financing activities | | | 112,253 | | | | (151,288 | ) |
| | | | | | | | | |
| Increase (decrease) in cash and cash equivalents | | | 22,843 | | | | (122,319 | ) |
| Cash and cash equivalents at beginning of year | | | 18,278 | | | | 140,597 | |
| Cash and cash equivalents at end of year | | $ | 41,121 | | | $ | 18,278 | |
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