CARMAX REPORTS RECORD FOURTH QUARTER
AND FISCAL YEAR RESULTS
Richmond, Va., April 10, 2013 – CarMax, Inc. (NYSE:KMX) today reported record results for the fourth quarter and fiscal year ended February 28, 2013.
§ | Net sales and operating revenues increased 14% to $2.83 billion in the fourth quarter. For the fiscal year, net sales and operating revenues increased 10% to $10.96 billion. |
§ | Used unit sales in comparable stores increased 6% in the fourth quarter and 5% in the fiscal year. |
§ | Total used unit sales rose 12% in the fourth quarter and 10% in the fiscal year. |
§ | Total wholesale unit sales increased 7% in the fourth quarter and 3% in the fiscal year. |
§ | CarMax Auto Finance (CAF) income increased 15% to $76.0 million in the fourth quarter. For the fiscal year, CAF income rose 14% to $299.3 million. |
§ | Net earnings grew 13% to $107.2 million in the fourth quarter. For the fiscal year, net earnings increased 5% to $434.3 million. The growth in net earnings per diluted share was similar to the net earnings growth, up 12% to $0.46 per share in the fourth quarter and up 4% to $1.87 per share for the fiscal year. |
“We are pleased to report solid increases in used and wholesale vehicle unit sales and CAF income, which allowed us to achieve record earnings for both the fourth quarter and the fiscal year,” said Tom Folliard, president and chief executive officer. “We believe our long-term focus on developing associates, enhancing the customer experience, driving efficiencies, and building our store base continues to drive great results.”
Fourth Quarter Business Performance Review
Sales. Used vehicle sales growth remained strong, with total used units climbing 12% and comparable store used units up 6%, despite having one fewer day in this year’s quarter. The comparable store used unit growth was driven by improved conversion, which we believe benefited from several factors, including more compelling credit offers from CAF, increased inventory selection and continued strong in-store execution.
For the fiscal year, our data indicates that we increased our share of the late-model (0- to 6-year old) used vehicle market by approximately 3%. The data indicates our share growth in the broader, 0- to 10-year old, used vehicle market was up approximately 6%, reflecting shifts in our inventory mix in recent years in response to changing customer needs.
Wholesale vehicle unit sales grew 7% compared with last year’s quarter. Wholesale unit sales benefited from the growth in our store base, as well as modest increases in appraisal traffic and our appraisal buy rate.
Other sales and revenues declined 4% compared with the prior year’s fourth quarter. Extended service plan (ESP) revenues increased 3%, as the effect of increases in used unit sales and ESP penetration was partially offset by an increase in our allowance for ESP returns. This adjustment reduced net earnings by $0.01 per share. Net third-party finance fees declined $5.2 million, due in part to a larger absolute number of financings sold at a discount. Third-party subprime providers (those who purchase financings at a discount) originated 15% of used vehicle unit sales in both the current year’s and the prior year’s fourth quarter.
Gross Profit. Total gross profit increased 9% to $369.2 million, primarily reflecting the increased used and wholesale vehicle unit sales. Used vehicle gross profit rose 12% to $253.3 million, driven by the 12% increase in used unit sales. Used vehicle gross profit per unit remained stable at $2,141 versus $2,135 in last year’s fourth quarter. Wholesale vehicle gross profit increased 11% to $77.6 million, largely due to the 7% increase in wholesale unit sales. Wholesale vehicle gross profit per unit rose 4% to $985. Other gross profit fell 8% to $37.4 million, largely due to the reduction in net third party-finance fees and the increase in the ESP return allowance.
SG&A. Selling, general and administrative expenses increased 9% to $265.5 million. The increase reflected the combination of the 10% increase in our store base since the beginning of last year’s fourth quarter (representing the addition of 11 stores), higher variable selling costs resulting from the 6% increase in comparable store used unit sales, and an increase in advertising expense. SG&A per retail unit declined to $2,212 versus $2,265 in the prior year’s quarter.
CarMax Auto Finance.(1) CAF income increased 15% to $76.0 million primarily as a result of the 17% increase in average managed receivables, which grew to $5.74 billion. The increase in average managed receivables reflected the rise in CAF origination volumes throughout fiscal 2012 and fiscal 2013 resulting from an expansion of CAF’s loan penetration rate, as well as our retail unit sales growth and higher average amounts financed.
The allowance for loan losses increased moderately to 1.0% of managed receivables as of February 28, 2013, compared with 0.9% as of February 29, 2012. Continued favorable loss experience partially offset the effect of the change in credit mix resulting from CAF’s transition back to our pre-recession origination strategy beginning in fiscal 2012.
Superstore Openings. During the fourth quarter, we opened two stores, adding stores in the Denver, Colorado, and Jacksonville, Florida, markets. In total, we opened ten stores in fiscal 2013, bringing our used car superstore count to 118 as of February 28, 2013. Subsequent to the end of the year, we opened a small format store in Harrisonburg, Virginia.
Share Repurchase Program. During the fourth quarter of fiscal 2013, we repurchased 4.0 million shares of common stock for $151.7 million pursuant to our share repurchase program. For the fiscal year, we repurchased 5.8 million shares at a cost of $211.9 million.
(1)Although CAF benefits from certain indirect overhead expenditures, we have elected not to allocate indirect costs to CAF in order to avoid making arbitrary allocation decisions.
Supplemental Financial Information
Sales Components
| | | | | | | | | | | | | | | | | |
| | Three Months Ended | Years Ended |
| | As of February 28 or 29(1) | As of February 28 or 29(1) |
(In millions) | | 2013 | 2012 | Change | 2013 | 2012 | Change |
Used vehicle sales | | $ | 2,297.4 | | $ | 1,973.7 | | 16.4 | % | $ | 8,747.0 | | $ | 7,826.9 | | 11.8 | % |
New vehicle sales | | | 45.2 | | | 45.8 | | (1.5) | % | | 207.7 | | | 200.6 | | 3.6 | % |
Wholesale vehicle sales | | | 427.1 | | | 395.7 | | 7.9 | % | | 1,759.6 | | | 1,721.6 | | 2.2 | % |
Other sales and revenues: | | | | | | | | | | | | | | | | | |
Extended service plan revenues | | | 50.1 | | | 48.6 | | 3.2 | % | | 202.9 | | | 179.6 | | 13.0 | % |
Service department sales | | | 25.4 | | | 24.0 | | 5.8 | % | | 101.8 | | | 98.6 | | 3.2 | % |
Third-party finance fees, net | | | (17.1) | | | (12.0) | | (43.3) | % | | (56.1) | | | (23.8) | | (136.0) | % |
Total other sales and revenues | | | 58.4 | | | 60.6 | | (3.7) | % | | 248.6 | | | 254.5 | | (2.3) | % |
Total net sales and operating revenues | | $ | 2,827.9 | | $ | 2,475.8 | | 14.2 | % | $ | 10,962.8 | | $ | 10,003.6 | | 9.6 | % |
(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.
Comparable Store Used Vehicle Sales Changes
| | | | | | | | | | | | |
| Three Months Ended | Years Ended |
| February 28 or 29 | February 28 or 29 |
| 2013 | 2012 | 2013 | 2012 |
Used vehicle units | | 6 | % | | 4 | % | | 5 | % | | 1 | % |
Used vehicle dollars | | 10 | % | | 7 | % | | 7 | % | | 7 | % |
Total Used Vehicle Sales Changes
| | | | | | | | | | | | |
| Three Months Ended | Years Ended |
| February 28 or 29 | February 28 or 29 |
| 2013 | 2012 | 2013 | 2012 |
Used vehicle units | | 12 | % | | 6 | % | | 10 | % | | 3 | % |
Used vehicle dollars | | 16 | % | | 10 | % | | 12 | % | | 9 | % |
Unit Sales
| | | | | | | | | | | | |
| Three Months Ended | Years Ended |
| February 28 or 29 | February 28 or 29 |
| 2013 | 2012 | 2013 | 2012 |
Used vehicles | | 118,306 | | | 105,769 | | | 447,728 | | | 408,080 | |
New vehicles | | 1,691 | | | 1,727 | | | 7,855 | | | 7,679 | |
Wholesale vehicles | | 78,720 | | | 73,897 | | | 324,779 | | | 316,649 | |
Average Selling Prices
| | | | | | | | | | | | |
| Three Months Ended | Years Ended |
| February 28 or 29 | February 28 or 29 |
| 2013 | 2012 | 2013 | 2012 |
Used vehicles | $ | 19,287 | | $ | 18,495 | | $ | 19,351 | | $ | 18,995 | |
New vehicles | $ | 26,591 | | $ | 26,409 | | $ | 26,316 | | $ | 25,986 | |
Wholesale vehicles | $ | 5,271 | | $ | 5,208 | | $ | 5,268 | | $ | 5,291 | |
Selected Operating Ratios
| | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | Years Ended |
| February 28 or 29 | February 28 or 29 |
(In millions) | 2013 | % (1) | 2012 | % (1) | 2013 | % (1) | 2012 | % (1) |
Net sales and operating revenues | $ | 2,827.9 | | 100.0 | | $ | 2,475.8 | | 100.0 | | $ | 10,962.8 | | 100.0 | | $ | 10,003.6 | | 100.0 | |
Gross profit | $ | 369.2 | | 13.1 | | $ | 338.2 | | 13.7 | | $ | 1,464.4 | | 13.4 | | $ | 1,378.8 | | 13.8 | |
CarMax Auto Finance income | $ | 76.0 | | 2.7 | | $ | 66.1 | | 2.7 | | $ | 299.3 | | 2.7 | | $ | 262.2 | | 2.6 | |
Selling, general, and administrative | | | | | | | | | | | | | | | | | | | | |
expenses | $ | 265.5 | | 9.4 | | $ | 243.5 | | 9.8 | | $ | 1,031.0 | | 9.4 | | $ | 940.8 | | 9.4 | |
Interest expense | $ | 8.0 | | 0.3 | | $ | 8.4 | | 0.3 | | $ | 32.4 | | 0.3 | | $ | 33.7 | | 0.3 | |
Earnings before income taxes | $ | 172.2 | | 6.1 | | $ | 152.8 | | 6.2 | | $ | 701.4 | | 6.4 | | $ | 666.9 | | 6.7 | |
Net earnings | $ | 107.2 | | 3.8 | | $ | 95.0 | | 3.8 | | $ | 434.3 | | 4.0 | | $ | 413.8 | | 4.1 | |
(1)Calculated as the ratio of the applicable amount to net sales and operating revenues.
Gross Profit
| | | | | | | | | | | | | | | | | | |
| Three Months Ended | Years Ended |
| February 28 or 29 | February 28 or 29 |
(In millions) | 2013 | 2012 | Change | 2013 | 2012 | Change |
Used vehicle gross profit | $ | 253.3 | | $ | 225.8 | | | 12.2 | % | $ | 971.5 | | $ | 888.6 | | | 9.3 | % |
New vehicle gross profit | | 0.9 | | | 1.4 | | | (34.4) | % | | 5.0 | | | 6.5 | | | (23.8) | % |
Wholesale vehicle gross profit | | 77.6 | | | 70.2 | | | 10.5 | % | | 308.1 | | | 301.8 | | | 2.1 | % |
Other gross profit | | 37.4 | | | 40.8 | | | (8.2) | % | | 179.8 | | | 181.9 | | | (1.2) | % |
Total | $ | 369.2 | | $ | 338.2 | | | 9.2 | % | $ | 1,464.4 | | $ | 1,378.8 | | | 6.2 | % |
Gross Profit per Unit
| | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | Years Ended |
| February 28 or 29 | February 28 or 29 |
| 2013 | 2012 | 2013 | 2012 |
| $ per unit(1) | %(2) | | $ per unit(1) | %(2) | | $ per unit(1) | %(2) | | $ per unit(1) | %(2) | |
Used vehicle gross profit | $ | 2,141 | | 11.0 | | $ | 2,135 | | 11.4 | | $ | 2,170 | | 11.1 | | $ | 2,177 | | 11.4 | |
New vehicle gross profit | $ | 525 | | 2.0 | | $ | 784 | | 3.0 | | $ | 630 | | 2.4 | | $ | 847 | | 3.2 | |
Wholesale vehicle gross profit | $ | 985 | | 18.2 | | $ | 950 | | 17.7 | | $ | 949 | | 17.5 | | $ | 953 | | 17.5 | |
Other gross profit | $ | 312 | | 64.2 | | $ | 379 | | 67.3 | | $ | 395 | | 72.3 | | $ | 438 | | 71.5 | |
Total gross profit | $ | 3,077 | | 13.1 | | $ | 3,146 | | 13.7 | | $ | 3,214 | | 13.4 | | $ | 3,316 | | 13.8 | |
(1)Calculated as category gross profit divided by its respective units sold, except the other and total categories, which are divided by total retail units sold.
(2)Calculated as a percentage of its respective sales or revenue.
SG&A Expenses
| | | | | | | | | | | | | | | | |
| Three Months Ended | | | Years Ended |
| February 28 or 29 | | | February 28 or 29 |
(In millions) | 2013 | 2012 | Change | 2013 | 2012 | Change |
Compensation and benefits (1) | $ | 154.8 | | $ | 136.8 | | 13.2 | % | $ | 581.9 | | $ | 521.0 | | 11.7 | % |
Store occupancy costs | | 50.1 | | | 45.2 | | 10.5 | % | | 199.9 | | | 187.6 | | 6.5 | % |
Advertising expense | | 29.6 | | | 23.7 | | 24.4 | % | | 106.3 | | | 99.1 | | 7.2 | % |
Other overhead costs (2) | | 31.0 | | | 37.8 | | (17.4) | % | | 142.9 | | | 133.1 | | 7.5 | % |
Total SG&A expenses | $ | 265.5 | | $ | 243.5 | | 9.0 | % | $ | 1,031.0 | | $ | 940.8 | | 9.6 | % |
(1)Excludes compensation and benefits related to reconditioning and vehicle repair service, which is included in cost of sales.
(2) Includes IT expenses, insurance, bad debt, travel, preopening and relocation costs, charitable contributions and other administrative expenses.
Components of CAF Income and Other CAF Information
| | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended February 28 or 29 | Years Ended February 28 or 29 |
(In millions) | | | 2013 | | % (1) | | | 2012 | | % (1) | | | 2013 | | % (1) | | | 2012 | | % (1) | |
Interest margin: | | | | | | | | | | | | | | | | | | | | | |
Interest and fee income | | $ | 126.4 | | 8.8 | | $ | 114.7 | | 9.4 | | $ | 495.3 | | 9.2 | | $ | 448.7 | | 9.6 | |
Interest expense | | | (22.7) | | (1.6) | | | (25.8) | | (2.1) | | | (95.1) | | (1.8) | | | (106.1) | | (2.3) | |
Total interest margin | | | 103.7 | | 7.2 | | | 88.9 | | 7.3 | | | 400.2 | | 7.4 | | | 342.6 | | 7.3 | |
Provision for loan losses | | | (16.0) | | (1.1) | | | (11.5) | | (0.9) | | | (56.2) | | (1.0) | | | (36.4) | | (0.8) | |
Total interest margin after | | | | | | | | | | | | | | | | | | | | | |
provision for loan losses | | | 87.7 | | 6.1 | | | 77.4 | | 6.3 | | | 344.0 | | 6.4 | | | 306.2 | | 6.6 | |
| | | | | | | | | | | | | | | | | | | | | |
Other income | | | ― | | ― | | | 0.1 | | ― | | | ― | | ― | | | 1.5 | | ― | |
Total direct expenses | | | (11.7) | | (0.8) | | | (11.4) | | (0.9) | | | (44.7) | | (0.8) | | | (45.5) | | (1.0) | |
CarMax Auto Finance income | | $ | 76.0 | | 5.3 | | $ | 66.1 | | 5.4 | | $ | 299.3 | | 5.6 | | $ | 262.2 | | 5.6 | |
| | | | | | | | | | | | | | | | | | | | | |
Total average managed | | | | | | | | | | | | | | | | | | | | | |
receivables | | $ | 5,744.3 | | | | $ | 4,894.4 | | | | $ | 5,385.5 | | | | $ | 4,662.4 | | | |
Net loans originated | | $ | 979.9 | | | | $ | 717.7 | | | | $ | 3,445.3 | | | | $ | 2,842.9 | | | |
Net CAF penetration rate | | | 42.6 | % | | | | 36.5 | % | | | | 39.4 | % | | | | 36.7 | % | | |
Weighted average contract rate | | | 7.1 | % | | | | 8.7 | % | | | | 7.9 | % | | | | 8.8 | % | | |
| | | | | | | | | | | | | | | | | | | | | |
Ending allowance for loan | | | | | | | | | | | | | | | | | | | | | |
losses | | $ | 57.3 | | | | $ | 43.3 | | | | $ | 57.3 | | | | $ | 43.3 | | | |
| | | | | | | | | | | | | | | | | | | | | |
Warehouse facility information: | | | | | | | | | | | | | | | | | | | | | |
Ending funded receivables | | $ | 792.0 | | | | $ | 553.0 | | | | $ | 792.0 | | | | $ | 553.0 | | | |
Ending unused capacity | | $ | 908.0 | | | | $ | 1,047.0 | | | | $ | 908.0 | | | | $ | 1,047.0 | | | |
| | | | | | | | | | | | | | | | | | | | | |
(1)Annualized percent of total average managed receivables.
Earnings Highlights
| | | | | | | | | | | | | | | | | | |
| Three Months Ended | Years Ended |
| February 28 or 29 | February 28 or 29 |
(In millions except per share data) | 2013 | 2012 | Change | 2013 | 2012 | Change |
Net earnings | $ | 107.2 | | $ | 95.0 | | | 12.8 | % | $ | 434.3 | | $ | 413.8 | | | 5.0 | % |
Diluted weighted average shares outstanding | | 231.1 | | | 231.3 | | | (0.1) | % | | 231.8 | | | 230.7 | | | 0.5 | % |
Net earnings per diluted share | $ | 0.46 | | $ | 0.41 | | | 12.2 | % | $ | 1.87 | | $ | 1.79 | | | 4.5 | % |
Planned Store Openings
We currently plan to open the following superstores within 12 months from February 28, 2013:
| | | |
| | | |
Location | Television Market | Market Status | Planned Opening Date |
Harrisonburg, Virginia (1) | Harrisonburg | New | Q1 Fiscal 2014 |
Columbus, Georgia | Columbus | New | Q1 Fiscal 2014 |
Savannah, Georgia | Savannah | New | Q1 Fiscal 2014 |
Katy, Texas | Houston | Existing | Q2 Fiscal 2014 |
Fairfield, California | Sacramento | Existing | Q2 Fiscal 2014 |
Jackson, Tennessee | Jackson | New | Q3 Fiscal 2014 |
Brandywine, Maryland | Washington/Baltimore | Existing | Q3 Fiscal 2014 |
St. Louis, Missouri | St. Louis | New | Q3 Fiscal 2014 |
St. Peters, Missouri | St. Louis | New | Q4 Fiscal 2014 |
Newark, Delaware | Philadelphia | New | Q4 Fiscal 2014 |
King of Prussia, Pennsylvania | Philadelphia | New | Q4 Fiscal 2014 |
Frederick, Maryland | Washington/Baltimore | Existing | Q4 Fiscal 2014 |
Elk Grove, California | Sacramento | Existing | Q4 Fiscal 2014 |
(1) Store opened in March 2013.
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 $300 million in fiscal 2014. We expect to open between 10 and 15 superstores in each of the following 2 fiscal years.
Conference Call Information
We will host a conference call for investors at 9:00 a.m. ET today, April 10, 2013. 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 26808736. 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 April 10, 2013, through June 20, 2013. A telephone replay also will be available through April 17, 2013, 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 26808736.
First Quarter Fiscal 2014 Earnings Release Date
We currently plan to release results for the first quarter ending May 31, 2013, on Friday, June 21, 2013, 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 2013.
About CarMax
CarMax, a member of the Fortune 500 and the S&P 500, and one of the Fortune “100 Best Companies to Work For,” for nine consecutive years, is the nation’s largest retailer of used vehicles. Headquartered in Richmond, Va., CarMax currently operates 119 used car superstores in 59 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 twelve months ended February 28, 2013, the company retailed 447,728 used vehicles and sold 324,779 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 changes related to the asset-backed securitization market. |
· | 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. |
· | Events that damage our reputation or harm the perception of the quality of our brand. |
· | 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 loss of key employees from our store, regional or corporate management teams or a significant increase in labor costs. |
· | The failure of key information systems. |
· | The effect of new accounting requirements or changes to U.S. generally accepted accounting principles. |
· | The effect of various litigation matters. |
· | Adverse conditions affecting one or more automotive manufacturers or manufacturer recalls. |
· | The occurrence of severe weather events. |
· | Factors related to the seasonal fluctuations in our business. |
· | Factors related to the geographic concentration of our superstores. |
· | Acts of terrorism, the outbreak of war, or other significant national or international events. |
For more details on factors that could affect expectations, see our Annual Report on Form 10-K for the fiscal year ended February 29, 2012, 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. 4107. 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:
Trina Lee, Director, Public Relations, (855) 887-2915
Britt Farrar, Manager, Public Relations, (855) 887-2915
