CARMAX REPORTS RECORD QUARTERLY RESULTS
Richmond, Va., June 20, 2014 – CarMax, Inc. (NYSE:KMX) today reported record results for the first quarter ended May 31, 2014.
| § | | Net sales and operating revenues increased 13.3% to $3.75 billion. |
| § | | Used unit sales in comparable stores increased 3.4%. |
| § | | Total used unit sales rose 9.8%. |
| § | | Total wholesale unit sales increased 9.9%. |
| § | | CarMax Auto Finance (CAF) income increased 8.7% to $94.6 million. |
| § | | Net earnings grew 15.7% to $169.7 million. Net earnings per diluted share rose 18.8% to $0.76. |
“We had another great quarter, hitting an all-time record level of quarterly sales and earnings,” said Tom Folliard, president and chief executive officer. “The improvement was broad-based, with contributions from our retail and wholesale operations, as well as from CAF.”
First Quarter Business Performance Review
Sales. Total used vehicle unit sales grew 9.8% and comparable store used unit sales grew 3.4% versus the prior year’s first quarter. This growth was on top of increases of 22.1% in total used units and 16.7% in comparable store used units in last year’s first quarter. This year’s comparable store used unit sales growth was driven by improved customer traffic. The percentage of retail vehicles financed by third-party subprime providers (those who purchase financings at a discount), combined with those financed under the previously announced CAF loan origination test, declined from 21.3% in the first quarter of fiscal 2014 to 16.1% in this year’s first quarter.
Wholesale vehicle unit sales grew 9.9% versus the first quarter of fiscal 2014. Wholesale unit sales benefited from increased appraisal traffic and a stronger wholesale vehicle buy rate, as well as the addition of new stores.
Other sales and revenues increased 13.0% year-over-year. Extended protection plan revenues (which includes extended service plan (ESP) and guaranteed asset protection revenues) declined $0.9 million versus the prior year level reflecting an increase in the cancellation reserves for the underlying products and a modest reduction in the ESP penetration rate, partially offset by the growth in total retail sales. Net third-party finance fees improved $8.6 million versus last year’s first quarter primarily due to the reduction in the percentage of sales financed by third-party subprime providers.
Gross Profit. Total gross profit increased 12.0% to $501.7 million. Used vehicle gross profit rose 9.9%, driven by the increase in total used unit sales, while used vehicle gross profit per unit remained comparable with the prior year period. Wholesale vehicle gross profit increased 17.5% versus the prior year’s quarter, reflecting the combination of the 9.9% increase in wholesale unit sales and an improvement in wholesale vehicle gross profit per unit, which rose 6.8% or $67 per unit. Strong industry wholesale pricing contributed to the strong wholesale gross profit per unit. Other gross profit rose 13.4%, reflecting the improvement in net third-party finance fees.
SG&A. Selling, general and administrative expenses increased 8.0% to $313.4 million, primarily reflecting the 14.4% increase in our store base since the beginning of last year’s first quarter (representing the addition of 17 stores). The SG&A expense benefited from a $6.5 million decrease in share-based compensation expense compared with the first quarter of fiscal 2014. SG&A per retail unit declined $39 to $2,047.
CarMax Auto Finance.(1) CAF income increased 8.7% to $94.6 million, driven by an increase in average managed receivables, partly offset by a lower total interest margin. Average managed receivables grew 20.1% to $7.39 billion as CAF loan originations have grown in recent years. The total interest margin, which reflects the spread between interest and fees charged to consumers and our funding costs, declined to 6.7% of average managed receivables in the current quarter from 7.2% in last year’s first quarter.
We continued our test to originate loans for customers who typically would be financed by our third-party subprime providers. During the first quarter of fiscal 2015, we originated $20.5 million of loans in this test, representing 0.8% of retail unit sales. As of May 31, 2014, a total of $29.6 million of loans had been originated in this test.
Superstore Openings. During the first quarter of fiscal 2015, we opened four stores, including three stores in new markets (Rochester, New York; Dothan, Alabama; and Spokane, Washington) and one in an existing market (Harrisburg/Lancaster, Pennsylvania). Subsequent to the end of the quarter, we opened our first store in the Madison, Wisconsin market.
Share Repurchase Program. During the first quarter, we repurchased 3.8 million shares of common stock for $174.1 million pursuant to our share repurchase program. As of May 31, 2014, we had $1.11 billion remaining available for repurchase under the program.
(1)Although CAF benefits from certain indirect overhead expenditures, we have not allocated indirect costs to CAF to avoid making subjective allocation decisions.
Supplemental Financial Information
Amounts and percentage calculations may not total due to rounding.
Sales Components
| | | | | | | | | |
| | |
| | Three Months Ended May 31 |
(In millions) | | 2014 | 2013 | Change |
Used vehicle sales | | $ | 3,060.3 | | $ | 2,701.8 | | 13.3 | % |
New vehicle sales | | | 69.8 | | | 52.4 | | 33.1 | % |
Wholesale vehicle sales | | | 545.2 | | | 490.7 | | 11.1 | % |
Other sales and revenues: | | | | | | | | | |
Extended protection plan revenues | | | 63.7 | | | 64.6 | | (1.4) | % |
Service department sales | | | 28.3 | | | 27.4 | | 3.5 | % |
Third-party finance fees, net | | | (17.2) | | | (25.8) | | 33.2 | % |
Total other sales and revenues | | | 74.8 | | | 66.2 | | 13.0 | % |
Total net sales and operating revenues | | $ | 3,750.2 | | $ | 3,311.1 | | 13.3 | % |
Unit Sales
| | | | | | | | |
| Three Months Ended May 31 |
| 2014 | | 2013 | | % Change |
Used vehicles | | 150,528 | | | 137,154 | | 9.8 | % |
New vehicles | | 2,597 | | | 1,949 | | 33.2 | % |
Wholesale vehicles | | 97,098 | | | 88,356 | | 9.9 | % |
Average Selling Prices
| | | | | | | | |
| Three Months Ended May 31 |
| 2014 | | 2013 | | % Change |
Used vehicles | $ | 20,173 | | $ | 19,540 | | 3.2 | % |
New vehicles | $ | 26,761 | | $ | 26,788 | | (0.1) | % |
Wholesale vehicles | $ | 5,450 | | $ | 5,388 | | 1.2 | % |
Vehicle Sales Changes
| | | | |
| Three Months Ended May 31 |
| 2014 | 2013 |
Used vehicle units | | 9.8% | | 22.1% |
Used vehicle revenues | | 13.3% | | 23.5% |
| | | | |
Wholesale vehicle units | | 9.9% | | 5.8% |
Wholesale vehicle revenues | | 11.1% | | 4.9% |
Comparable Store Used Vehicle Sales Changes (1)
| | | | |
| Three Months Ended May 31 |
| | 2014 | 2013 |
Used vehicle units | | 3.4% | | 16.7% |
Used vehicle revenues | | 6.6% | | 18.1% |
(1)Stores are added to the comparable store base beginning in their fourteenth full month of operation. Comparable store calculations include results for a set of stores that were included in our comparable store base in both applicable periods.
Selected Operating Ratios
| | | | | | | | | | |
| Three Months Ended May 31 |
(In millions) | 2014 | % (1) | 2013 | % (1) |
Net sales and operating revenues | $ | 3,750.2 | | 100.0 | | $ | 3,311.1 | | 100.0 | |
Gross profit | $ | 501.7 | | 13.4 | | $ | 448.1 | | 13.5 | |
CarMax Auto Finance income | $ | 94.6 | | 2.5 | | $ | 87.0 | | 2.6 | |
Selling, general, and administrative | | | | | | | | | | |
expenses | $ | 313.4 | | 8.4 | | $ | 290.2 | | 8.8 | |
Interest expense | $ | 7.6 | | 0.2 | | $ | 7.9 | | 0.2 | |
Earnings before income taxes | $ | 275.0 | | 7.3 | | $ | 237.3 | | 7.2 | |
Net earnings | $ | 169.7 | | 4.5 | | $ | 146.7 | | 4.4 | |
(1)Calculated as a percentage of net sales and operating revenues.
Gross Profit
| | | | | | | | | |
| Three Months Ended May 31 |
(In millions) | 2014 | 2013 | Change |
Used vehicle gross profit | $ | 334.1 | | $ | 303.9 | | | 9.9 | % |
New vehicle gross profit | | 1.8 | | | 1.1 | | | 71.4 | % |
Wholesale vehicle gross profit | | 101.6 | | | 86.5 | | | 17.5 | % |
Other gross profit | | 64.2 | | | 56.6 | | | 13.4 | % |
Total | $ | 501.7 | | $ | 448.1 | | | 12.0 | % |
Gross Profit per Unit
| | | | | | | | | | |
| Three Months Ended May 31 |
| 2014 | 2013 |
| $ per unit(1) | %(2) | | $ per unit(1) | %(2) | |
Used vehicle gross profit | $ | 2,220 | | 10.9 | | $ | 2,216 | | 11.2 | |
New vehicle gross profit | $ | 709 | | 2.6 | | $ | 551 | | 2.0 | |
Wholesale vehicle gross profit | $ | 1,046 | | 18.6 | | $ | 979 | | 17.6 | |
Other gross profit | $ | 419 | | 85.8 | | $ | 407 | | 85.5 | |
Total gross profit | $ | 3,277 | | 13.4 | | $ | 3,221 | | 13.5 | |
(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 total retail units sold.
(2)Calculated as a percentage of its respective sales or revenue.
SG&A Expenses
| | | | | | | | | |
| Three Months Ended May 31 |
(In millions) | 2014 | 2013 | Change |
Compensation and benefits (1) | $ | 178.9 | | $ | 172.1 | | | 4.0 | % |
Store occupancy costs | | 58.3 | | | 52.5 | | | 11.0 | % |
Advertising expense | | 30.7 | | | 27.1 | | | 13.3 | % |
Other overhead costs (2) | | 45.5 | | | 38.5 | | | 18.2 | % |
Total SG&A expenses | $ | 313.4 | | $ | 290.2 | | | 8.0 | % |
SG&A per retail unit | $ | 2,047 | | $ | 2,086 | | $ | (39) | |
(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.
Components of CAF Income and Other CAF Information
| | | | | | | | | | | |
| | Three Months Ended May 31 |
(In millions) | | | 2014 | | % (1) | | | 2013 | | % (1) | |
Interest margin: | | | | | | | | | | | |
Interest and fee income | | $ | 147.0 | | 8.0 | | $ | 133.5 | | 8.7 | |
Interest expense | | | (23.1) | | (1.2) | | | (22.8) | | (1.5) | |
Total interest margin | | | 123.9 | | 6.7 | | | 110.7 | | 7.2 | |
Provision for loan losses | | | (15.8) | | (0.9) | | | (11.3) | | (0.7) | |
Total interest margin after provision | | | | | | | | | | | |
for loan losses | | | 108.1 | | 5.8 | | | 99.4 | | 6.5 | |
Total direct expenses | | | (13.5) | | (0.7) | | | (12.4) | | (0.8) | |
CarMax Auto Finance income | | $ | 94.6 | | 5.1 | | $ | 87.0 | | 5.7 | |
| | | | | | | | | | | |
Total average managed receivables | | $ | 7,390.1 | | | | $ | 6,152.5 | | | |
Net loans originated | | $ | 1,236.3 | | | | $ | 1,120.2 | | | |
Net CAF penetration rate | | | 41.3 | % | | | | 41.5 | % | | |
Weighted average contract rate | | | 7.2 | % | | | | 7.0 | % | | |
| | | | | | | | | | | |
Ending allowance for loan losses | | $ | 75.4 | | | | $ | 60.9 | | | |
| | | | | | | | | | | |
Warehouse facility information: | | | | | | | | | | | |
Ending funded receivables | | $ | 964.0 | | | | $ | 941.0 | | | |
Ending unused capacity | | $ | 836.0 | | | | $ | 759.0 | | | |
| | | | | | | | | | | |
| (1) | | Annualized percentage of total average managed receivables. |
Earnings Highlights
| | | | | | | | | |
| Three Months Ended May 31 |
(In millions except per share data) | 2014 | 2013 | Change |
Net earnings | $ | 169.7 | | $ | 146.7 | | | 15.7 | % |
Diluted weighted average shares outstanding | | 223.6 | | | 228.6 | | | (2.2) | % |
Net earnings per diluted share | $ | 0.76 | | $ | 0.64 | | | 18.8 | % |
Planned Superstore Openings
We currently plan to open the following superstores within 12 months from May 31, 2014:
| | | |
| | | |
Location | Television Market | Market Status | Planned Opening Date |
Madison, Wisconsin (1) | Madison | New | Q2 Fiscal 2015 |
Fort Worth, Texas | Dallas | Existing | Q2 Fiscal 2015 |
Lynchburg, Virginia | Roanoke/Lynchburg | New | Q2 Fiscal 2015 |
Milwaukie, Oregon | Portland | New | Q2 Fiscal 2015 |
Beaverton, Oregon | Portland | New | Q3 Fiscal 2015 |
Saltillo, Mississippi | Tupelo | New | Q3 Fiscal 2015 |
Reno, Nevada | Reno | New | Q3 Fiscal 2015 |
Raleigh, North Carolina | Raleigh | Existing | Q3 Fiscal 2015 |
Warrensville Heights, Ohio | Cleveland | New | Q4 Fiscal 2015 |
Brooklyn Park, Minnesota | Minneapolis/St Paul | New | Q1 Fiscal 2016 |
Parker, Colorado | Denver | Existing | Q1 Fiscal 2016 |
Sicklerville, New Jersey | Philadelphia | Existing | Q1 Fiscal 2016 |
Gainesville, Florida | Gainesville | New | Q1 Fiscal 2016 |
| | | |
(1)Opened in June 2014.
Normal construction, permitting or other scheduling delays could shift the opening dates of any of these stores into a later period. We currently estimate total capital expenditures will be approximately
$325 million in fiscal 2015. We plan to open 13 superstores in fiscal 2015 and between 10 and 15 superstores in each of the following two fiscal years.
Conference Call Information
We will host a conference call for investors at 9:00 a.m. ET today, June 20, 2014. 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 53258654. 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 through September 22, 2014. A telephone replay also will be available through June 27, 2014, 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 53258654.
Second Quarter Fiscal 2015 Earnings Release Date
We currently plan to release results for the second quarter ending August 31, 2014, on Tuesday, September 23, 2014, 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 investor.carmax.com in September 2014.
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 ten consecutive years, is the nation’s largest retailer of used vehicles. Headquartered in Richmond, Va., CarMax currently operates 136 used car superstores in 68 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 28, 2014, the company retailed 526,929 used vehicles and sold 342,576 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 the competitive landscape and/or our failure to successfully adjust to such changes. |
| · | | 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. |
| · | | Events that damage our reputation or harm the perception of the quality of our brand. |
| · | | 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 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, 2014, 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 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. 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.
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
Catherine Gryp, Manager, Public Relations, (855) 887-2915
CARMAX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
| | | | | | |
| | Three Months Ended May 31 |
(In thousands except per share data) | | 2014 | % (1) | | 2013 | % (1) |
SALES AND OPERATING REVENUES: | | | | | | |
Used vehicle sales | $ | 3,060,341 | 81.6 | $ | 2,701,755 | 81.6 |
New vehicle sales | | 69,789 | 1.9 | | 52,427 | 1.6 |
Wholesale vehicle sales | | 545,245 | 14.5 | | 490,659 | 14.8 |
Other sales and revenues | | 74,821 | 2.0 | | 66,216 | 2.0 |
NET SALES AND OPERATING REVENUES | | 3,750,196 | 100.0 | | 3,311,057 | 100.0 |
Cost of sales | | 3,248,465 | 86.6 | | 2,862,961 | 86.5 |
GROSS PROFIT | | 501,731 | 13.4 | | 448,096 | 13.5 |
CARMAX AUTO FINANCE INCOME | | 94,615 | 2.5 | | 87,019 | 2.6 |
| | | | | | |
Selling, general and administrative expenses | | 313,446 | 8.4 | | 290,189 | 8.8 |
Interest expense | | 7,601 | 0.2 | | 7,878 | 0.2 |
Other (expense) income | | (277) | ― | | 241 | ― |
Earnings before income taxes | | 275,022 | 7.3 | | 237,289 | 7.2 |
Income tax provision | | 105,369 | 2.8 | | 90,638 | 2.7 |
NET EARNINGS | $ | 169,653 | 4.5 | $ | 146,651 | 4.4 |
WEIGHTED AVERAGE COMMON SHARES: | | | | | | |
Basic | | 220,268 | | | 224,618 | |
Diluted | | 223,632 | | | 228,552 | |
NET EARNINGS PER SHARE: | | | | | | |
Basic | $ | 0.77 | | $ | 0.65 | |
Diluted | $ | 0.76 | | $ | 0.64 | |
(1)Calculated as a percentage of net sales and operating revenues and sums may not equal totals due to rounding.
CARMAX, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| | | | | | | | | | | |
| | | (Unaudited) | | | | (Unaudited) |
| | | May 31 | February 28 | May 31 |
(In thousands except share data) | | 2014 | 2014 | 2013 |
ASSETS | | | | | | | | | | |
| CURRENT ASSETS: | | | | | | | | | | |
| Cash and cash equivalents | | $ | 532,191 | | $ | 627,901 | | $ | 725,267 | |
| Restricted cash from collections on auto loan receivables | | | 290,653 | | | 259,299 | | | 240,715 | |
| Accounts receivable, net | | | 97,810 | | | 79,923 | | | 70,452 | |
| Inventory | | | 1,681,800 | | | 1,641,424 | | | 1,398,200 | |
| Deferred income taxes | | | 8,080 | | | 7,866 | | | 4,737 | |
| Other current assets | | | 26,202 | | | 26,811 | | | 15,402 | |
| TOTAL CURRENT ASSETS | | | 2,636,736 | | | 2,643,224 | | | 2,454,773 | |
| Auto loan receivables, net | | | 7,547,665 | | | 7,147,848 | | | 6,310,446 | |
| Property and equipment, net | | | 1,696,940 | | | 1,652,977 | | | 1,444,128 | |
| Deferred income taxes | | | 150,905 | | | 152,199 | | | 138,158 | |
| Other assets | | | 116,714 | | | 110,909 | | | 102,949 | |
| TOTAL ASSETS | | $ | 12,148,960 | | $ | 11,707,157 | | $ | 10,450,454 | |
| | | | | | | | | | | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | | | |
| CURRENT LIABILITIES: | | | | | | | | | | |
| Accounts payable | | $ | 433,115 | | $ | 427,492 | | $ | 316,640 | |
| Accrued expenses and other current liabilities | | | 159,298 | | | 202,588 | | | 109,714 | |
| Accrued income taxes | | | 94,816 | | | 2,438 | | | 58,965 | |
| Short-term debt | | | 1,242 | | | 582 | | | 972 | |
| Current portion of finance and capital lease obligations | | | 19,715 | | | 18,459 | | | 16,830 | |
| Current portion of non-recourse notes payable | | | 253,972 | | | 223,938 | | | 207,113 | |
| TOTAL CURRENT LIABILITIES | | | 962,158 | | | 875,497 | | | 710,234 | |
| Finance and capital lease obligations, excluding current portion | | | 315,762 | | | 315,925 | | | 332,965 | |
| Non-recourse notes payable, excluding current portion | | | 7,373,003 | | | 7,024,506 | | | 6,160,242 | |
| Other liabilities | | | 168,665 | | | 174,232 | | | 171,631 | |
| TOTAL LIABILITIES | | | 8,819,588 | | | 8,390,160 | | | 7,375,072 | |
| | | | | | | | | | | |
| Commitments and contingent liabilities | | | | | | | | | | |
| SHAREHOLDERS’ EQUITY: | | | | | | | | | | |
| Common stock, $0.50 par value; 350,000,000 shares authorized; | | | | | | | | | | |
| 218,483,173 and 221,685,984 shares issued and outstanding | | | | | | | | | | |
| as of May 31, 2014 and February 28, 2014, respectively | | | 109,242 | | | 110,843 | | | 112,073 | |
| Capital in excess of par value | | | 1,036,197 | | | 1,038,209 | | | 990,778 | |
| Accumulated other comprehensive loss | | | (45,776) | | | (46,271) | | | (57,510) | |
| Retained earnings | | | 2,229,709 | | | 2,214,216 | | | 2,030,041 | |
| TOTAL SHAREHOLDERS’ EQUITY | | | 3,329,372 | | | 3,316,997 | | | 3,075,382 | |
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | | $ | 12,148,960 | | $ | 11,707,157 | | $ | 10,450,454 | |
CARMAX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| | | | | | | |
| | Three Months Ended May 31 |
(In thousands) | | 2014 | | 2013 |
OPERATING ACTIVITIES: | | | | | | | |
Net earnings | | $ | 169,653 | | $ | 146,651 | |
Adjustments to reconcile net earnings to net cash | | | | | | | |
used in operating activities: | | | | | | | |
Depreciation and amortization | | | 27,343 | | | 24,335 | |
Share-based compensation expense | | | 15,388 | | | 22,941 | |
Provision for loan losses | | | 15,847 | | | 11,299 | |
Provision for cancellation reserves | | | 21,118 | | | 9,123 | |
Deferred income tax provision | | | 771 | | | 6,695 | |
Loss (gain) on disposition of assets and other | | | 424 | – | | (178) | |
Net (increase) decrease in: | | | | | | | |
Accounts receivable, net | | | (17,887) | | | 21,509 | |
Inventory | | | (40,376) | | | 119,613 | |
Other current assets | | | 664 | | | 7,293 | |
Auto loan receivables, net | | | (415,664) | | | (425,827) | |
Other assets | | | 3,467 | | | (2,592) | |
Net increase (decrease) in: | | | | | | | |
Accounts payable, accrued expenses and other current | | | | | | | |
liabilities and accrued income taxes | | | 40,424 | | | 533 | |
Other liabilities | | | (30,252) | | | (18,974) | |
NET CASH USED IN OPERATING ACTIVITIES | | | (209,080) | | | (77,579) | |
INVESTING ACTIVITIES: | | | | | | | |
Capital expenditures | | | (53,709) | | | (42,045) | |
Proceeds from sales of assets | | | ― | | | 4,610 | |
Increase in restricted cash from collections on auto loan receivables | | | (31,354) | | | (16,428) | |
Increase in restricted cash in reserve accounts | | | (3,259) | | | (2,812) | |
Release of restricted cash from reserve accounts | | | 4 | | | 10,011 | |
(Purchases) sales of money market securities, net | | | (3,035) | | | 1,313 | |
Purchases of trading securities | | | (2,798) | | | (1,161) | |
Sales of trading securities | | | 32 | | | ― | |
NET CASH USED IN INVESTING ACTIVITIES | | | (94,119) | | | (46,512) | |
FINANCING ACTIVITIES: | | | | | | | |
Increase in short-term debt, net | | | 660 | | | 617 | |
Payments on finance and capital lease obligations | | | (4,204) | | | (3,796) | |
Issuances of non-recourse notes payable | | | 1,897,000 | | | 1,774,000 | |
Payments on non-recourse notes payable | | | (1,518,469) | | | (1,261,735) | |
Repurchase and retirement of common stock | | | (171,924) | | | (130,215) | |
Equity issuances, net | | | 120 | | | 11,204 | |
Excess tax benefits from share-based payment arrangements | | | 4,306 | | | 9,919 | |
NET CASH PROVIDED BY FINANCING ACTIVITIES | | | 207,489 | | | 399,994 | |
(Decrease) increase in cash and cash equivalents | | | (95,710) | | | 275,903 | |
Cash and cash equivalents at beginning of year | | | 627,901 | | | 449,364 | |
CASH AND CASH EQUIVALENTS AT END OF PERIOD | | $ | 532,191 | | $ | 725,267 | |
