CarMax, Inc. (NYSE:KMX), the nation’s largest retailer of used
cars, today reported record sales and earnings for the fourth
quarter and fiscal year ended February 29, 2020. The company also
discussed its response to the rapidly evolving Coronavirus
situation.
Highlights:
- Net sales and operating revenues increased 14.9% to $4.96
billion in the fourth quarter. For the fiscal year, net sales and
operating revenues increased 11.8% to $20.32 billion.
- Total used unit sales rose 14.7% in the fourth quarter and
11.2% for the fiscal year.
- Used unit sales in comparable stores increased 11.0% in the
fourth quarter and 7.7% for the fiscal year.
- Our increased sales led to an estimated 4.2% increase in our
share of age 0- to 10-year-old used vehicle sales in our current
comparable markets, to 4.7% in calendar 2019.
- Total wholesale unit sales increased 2.0% in the fourth quarter
and 4.2% for the fiscal year.
- CarMax Auto Finance (CAF) income increased 7.9% to $111.9
million in the fourth quarter. For the fiscal year, CAF income
increased 4.0% to $456.0 million.
- In the fourth quarter, net earnings increased 11.6% to $214.9
million and net earnings per diluted share increased 15.0% to
$1.30. For the fiscal year, net earnings increased 5.5% to $888.4
million and net earnings per diluted share increased 11.3% to
$5.33.
- Our omni-channel experience was available to more than 60% of
customers as of the end of fiscal 2020. For our remaining markets,
we are pivoting to focus on rolling out the most pertinent parts of
the experience as quickly and broadly as possible given current
customer needs.
CEO Commentary:
“We are very pleased to report record used vehicle sales and
earnings per share for both our fourth quarter and the full year,”
said Bill Nash, president and chief executive officer. “However, at
this time, our thoughts, focus and concerns are with our
associates, customers and communities as we navigate the
challenging times we currently face.
“The Coronavirus pandemic is unprecedented,” continued Nash.
“The situation is dynamic and changing quickly, making it difficult
to predict what the immediate future holds. However, we believe we
have the leadership experience, liquidity, resources, financial
stability and partners in place to withstand the current
environment and be well positioned for when the economy and
consumers rebound.”
Coronavirus Update:
We are following the mandates from public health officials and
government agencies, including implementation of enhanced cleaning
measures, social distancing guidelines and, in some localities, the
closing of stores and wholesale auctions.
The positive sales momentum experienced in fiscal 2020 carried
into the beginning of March, with robust comparable store used unit
sales through the first week of the month. Since then, the
Coronavirus situation within the U.S. has rapidly escalated and
sales have dropped significantly. Over the past few weeks,
approximately half of our stores have closed or are running under
limited operations. For our stores that are open, consumer demand
has progressively deteriorated.
Financial Position. We have
taken proactive measures to bolster our liquidity position and
provide additional financial flexibility, including drawing down
additional funds on our revolving credit facility. As of March 31,
we had approximately $700 million of cash and cash equivalents on
hand, more than $300 million of unused capacity on the revolving
credit facility and more than $2.5 billion of inventory. We also
own the real estate and buildings in more than 140 of our locations
across the country, with a net book value in excess of $1.8
billion. From a debt perspective, at March 31, we had $2.5 billion
of long-term debt, consisting of approximately $1.1 billion
outstanding under the revolving credit facility, $800 million of
senior notes and term loans and approximately $535 million in
financing obligations related to sale-leasebacks on select stores.
Importantly, we have no near-term maturities.
In addition, subsequent to the end of the fiscal year, we halted
our stock repurchase program, although the repurchase authorization
remains effective. We also paused our store expansion strategy
until the Coronavirus situations stabilizes. And, we are actively
aligning operating expenses to the current state of the
business.
Fourth Quarter Business Performance
Review:
Sales. Total used vehicle
unit sales increased 14.7%, including an 11.0% increase in
comparable store used unit sales compared with the prior year’s
fourth quarter. The comparable store sales performance reflected
strong conversion, which was aided by strong CAF performance and
continued support from our third-party lending partners; the
benefit of leap year, which added an extra Saturday during
tax-refund season; and solid growth in selling opportunities (e.g.,
web and phone leads), which we believe benefited from both our
national marketing campaign and the favorable response to our
consumer initiatives. Also contributing to the robust sales growth
were solid execution by the associates in our stores and customer
experience centers and an overall favorable used car sales
environment.
Total wholesale vehicle unit sales increased 2.0% compared with
the fourth quarter of fiscal 2019, driven by an improvement in our
appraisal buy rate and the growth in our store base, partially
offset by lower appraisal traffic. We achieved a record buy rate in
fiscal 2020.
Other sales and revenues increased 9.6% compared with the fourth
quarter of fiscal 2019, primarily driven by an increase in extended
protection plan (EPP) net revenues. EPP revenues rose $17.4
million, reflecting our strong used unit growth and increased
margins. In addition, we recognized $13.8 million in EPP profit
sharing revenue. These increases were partially offset by the net
effects of a $10.4 million favorable adjustment to EPP cancellation
reserves in the prior year’s fourth quarter and a $2.4 million
unfavorable adjustment in the current year’s quarter. We received
payments of $46.0 million in February 2020, representing the profit
sharing accrued during fiscal 2019 and fiscal 2020, which was based
on claims experience from calendar years 2016 through 2019. In
future years, we expect EPP profit sharing revenue will be less
material, as it will reflect only a single incremental year versus
four years of activity.
Gross Profit. Total gross
profit increased 12.3% versus last year’s fourth quarter to $672.9
million. Used vehicle gross profit rose 16.2%, reflecting the
increase in total used unit sales and an improvement in used
vehicle gross profit per unit to $2,195 compared with $2,166 in the
prior year’s quarter. Wholesale vehicle gross profit increased 3.7%
versus the prior year’s quarter, driven by both the increase in
wholesale unit sales and an increase in wholesale vehicle gross
profit per unit to $993 compared with $977 in last year’s fourth
quarter. Other gross profit increased 5.9%, as the $17.4 million
growth in EPP profits was partially offset by an $11.5 million
decline in service department profits. The current quarter’s
service profits continued to be adversely affected by the increase
in our post-sale warranty period from 30 to 90 days implemented in
May of fiscal 2020 and, to a lesser extent, near-term
inefficiencies resulting from our recent ramp in technicians. We
believe the increase in our post-sale warranty period is beneficial
in the long term as it provides a better overall customer
experience; however, it does result in more claims, which increases
service costs and utilizes more of our retail service capacity.
SG&A. Compared with the
fourth quarter of fiscal 2019, SG&A expenses increased 13.0% to
$484.7 million. Factors contributing to the change included the 9%
increase in our store base since the beginning of last year’s
fourth quarter (representing the addition of 18 stores), higher
variable costs associated with our strong retail sales growth, and
continued spending to advance our technology platforms and support
our core and omni-channel strategic initiatives. SG&A per used
unit was $2,345 in the current quarter, down $35 year-over-year.
The fourth quarter SG&A per unit benefited from a $21 per unit
reduction in stock-based compensation expense. For the fiscal year,
SG&A per used unit rose $20 to $2,330. However, excluding
stock-based compensation expense, which primarily reflected the
effect of the 41% increase our share price during fiscal 2020, we
levered SG&A modestly on a per unit basis. For the fiscal year,
as expected, advertising expense per used unit rose modestly to
$230 versus $222 in fiscal 2019.
CarMax Auto
Finance.(1) Compared with last year’s fourth
quarter, CAF income increased 7.9% to $111.9 million, reflecting an
8.2% increase in average managed receivables and an improvement in
the total interest margin percentage, partially offset by a higher
loan loss provision. The total interest margin percentage, which
represents the spread between interest and fees charged to
consumers and our funding costs, improved to 5.8% of average
managed receivables from 5.5% in the prior year’s fourth quarter.
The provision for loan losses increased to $53.0 million from $42.1
million in the prior year quarter, reflecting both the growth in
average managed receivables and a modest increase in losses.
However, we remained well within the range of our overall net loss
expectations, and the allowance for loan losses of 1.16% of ending
managed receivables as of February 29, 2020, was similar to the
ratio for the earlier interim quarters of fiscal 2020.
Share Repurchase Activity.
We repurchased 1.2 million shares of common stock for $113.6
million pursuant to our share repurchase program during the fourth
quarter of fiscal 2020. For the full year, we repurchased 7.0
million shares for $561.6 million in fiscal 2020, down from $902.9
million in the prior year. As of February 29, 2020, we had $1.55
billion remaining available for repurchase under the outstanding
authorization. Subsequent to the end of the fiscal year, we halted
our stock repurchase program, although the repurchase authorization
remains effective.
Components of Debt. As of
February 29, 2020, we had long-term debt, excluding non-recourse
notes payable, of $1.79 billion, consisting of $452.7 million
outstanding under our revolving credit facility, $800 million of
senior notes and term loans and $536.7 million in financing
obligations related to sale-leasebacks on select stores. The
revolving credit facility and term loan maturity dates are in 2024,
and the earliest of the staggered maturities on the senior notes is
in 2023. At February 29, 2020, we had additional borrowing capacity
of $997.3 million under the revolving credit facility.
As of February 29, 2020, $2.18 billion of auto loan receivables
were funded through our warehouse facilities and unused warehouse
capacity totaled $1.32 billion. Our warehouse facilities have
annual terms with staggered renewal dates between August 2020 and
February 2021. As of February 29, 2020, $11.43 billion of
non-recourse notes payable were outstanding related to receivables
funded in asset-backed term funding transactions.
(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 February 29
or 28
Years Ended February 29 or
28
(In millions)
2020
2019
Change
2020
2019
Change
Used vehicle sales
$
4,253.7
$
3,628.4
17.2
%
$
17,169.5
$
15,172.8
13.2
%
Wholesale vehicle sales
548.3
543.8
0.8
%
2,500.0
2,393.0
4.5
%
Other sales and revenues:
Extended protection plan revenues
115.7
98.3
17.7
%
437.4
382.5
14.4
%
Third-party finance fees, net
(10.6
)
(10.8
)
2.0
%
(45.8
)
(43.4
)
(5.6
)%
Other
55.4
58.9
(6.0
)%
258.9
268.2
(3.5
)%
Total other sales and revenues
160.5
146.4
9.6
%
650.5
607.3
7.1
%
Total net sales and operating revenues
$
4,962.5
$
4,318.6
14.9
%
$
20,320.0
$
18,173.1
11.8
%
Unit Sales
Three Months Ended February 29
or 28
Years Ended February 29 or
28
2020
2019
Change
2020
2019
Change
Used vehicles
206,718
180,207
14.7
%
832,640
748,961
11.2
%
Wholesale vehicles
104,900
102,887
2.0
%
466,177
447,491
4.2
%
Average Selling Prices
Three Months Ended February 29
or 28
Years Ended February 29 or
28
2020
2019
Change
2020
2019
Change
Used vehicles
$
20,380
$
19,978
2.0
%
$
20,418
$
20,077
1.7
%
Wholesale vehicles
$
4,954
$
5,024
(1.4
)%
$
5,089
$
5,098
(0.2
)%
Vehicle Sales Changes
Three Months Ended February 29
or 28
Years Ended February 29 or
28
2020
2019
2020
2019
Used vehicle units
14.7
%
5.6
%
11.2
%
3.8
%
Used vehicle revenues
17.2
%
5.8
%
13.2
%
5.4
%
Wholesale vehicle units
2.0
%
3.7
%
4.2
%
9.5
%
Wholesale vehicle revenues
0.8
%
3.1
%
4.5
%
9.7
%
Comparable Store Used Vehicle Sales
Changes (1)
Three Months Ended February 29
or 28
Years Ended February 29 or
28
2020
2019
2020
2019
Used vehicle units
11.0
%
2.8
%
7.7
%
0.3
%
Used vehicle revenues
13.4
%
3.0
%
9.7
%
1.9
%
(1) Stores are added to the comparable store base beginning in
their fourteenth full month of operation. Comparable store
calculations include results for a set of stores that were included
in our comparable store base in both the current and corresponding
prior year periods.
Used Vehicle Financing Penetration by
Channel (Before the Impact of 3-day Payoffs) (1)
Three Months Ended February 29
or 28
Years Ended February 29 or
28
2020
2019
2020
2019
CAF (2)
46.7
%
47.0
%
46.7
%
48.4
%
Tier 2 (3)
20.5
%
19.5
%
20.2
%
17.9
%
Tier 3 (4)
10.0
%
10.7
%
10.2
%
9.9
%
Other (5)
22.8
%
22.8
%
22.9
%
23.8
%
Total
100.0
%
100.0
%
100.0
%
100.0
%
(1) Calculated as used vehicle units financed for respective
channel as a percentage of total used units sold. (2) Includes
CAF's Tier 3 loan originations, which represent less than 1% of
total used units sold. (3) Third-party finance providers who
generally pay us a fee or to whom no fee is paid. (4) Third-party
finance providers to whom we pay a fee. (5) Represents customers
arranging their own financing and customers that do not require
financing.
Selected Operating
Ratios
Three Months Ended February 29
or 28
Years Ended February 29 or
28
(In millions)
2020
% (1)
2019
% (1)
2020
% (1)
2019
% (1)
Net sales and operating revenues
$
4,962.5
100.0
$
4,318.6
100.0
$
20,320.0
100.0
$
18,173.1
100.0
Gross profit
$
672.9
13.6
$
599.4
13.9
$
2,722.3
13.4
$
2,480.6
13.6
CarMax Auto Finance income
$
111.9
2.3
$
103.7
2.4
$
456.0
2.2
$
438.7
2.4
Selling, general, and administrative
expenses
$
484.7
9.8
$
429.0
9.9
$
1,940.1
9.5
$
1,730.3
9.5
Interest expense
$
22.3
0.4
$
21.0
0.5
$
83.0
0.4
$
75.8
0.4
Earnings before income taxes
$
276.6
5.6
$
255.8
5.9
$
1,161.0
5.7
$
1,112.8
6.1
Net earnings
$
214.9
4.3
$
192.6
4.5
$
888.4
4.4
$
842.4
4.6
(1) Calculated as a percentage of net sales and operating
revenues.
Gross Profit
Three Months Ended February 29
or 28
Years Ended February 29 or
28
(In millions)
2020
2019
Change
2020
2019
Change
Used vehicle gross profit
$
453.7
$
390.3
16.2
%
$
1,820.1
$
1,628.7
11.7
%
Wholesale vehicle gross profit
104.2
100.5
3.7
%
454.4
431.0
5.4
%
Other gross profit
115.0
108.6
5.9
%
447.8
420.9
6.4
%
Total
$
672.9
$
599.4
12.3
%
$
2,722.3
$
2,480.6
9.7
%
Gross Profit per Unit
Three Months Ended February 29
or 28
Years Ended February 29 or
28
2020
2019
2020
2019
$ per unit(1)
%(2)
$ per unit(1)
%(2)
$ per unit(1)
%(2)
$ per unit(1)
%(2)
Used vehicle gross profit
$
2,195
10.7
$
2,166
10.8
$
2,186
10.6
$
2,175
10.7
Wholesale vehicle gross profit
$
993
19.0
$
977
18.5
$
975
18.2
$
963
18.0
Other gross profit
$
556
71.6
$
602
74.1
$
538
68.9
$
562
69.3
Total gross profit
$
3,255
13.6
$
3,326
13.9
$
3,270
13.4
$
3,312
13.6
(1) Calculated as category gross profit divided by its
respective units sold, except the other and total categories, which
are divided by total used units sold. (2) Calculated as a
percentage of its respective sales or revenue.
SG&A Expenses
Three Months Ended February 29
or 28
Years Ended February 29 or
28
(In millions)
2020
2019
Change
2020
2019
Change
Compensation and benefits:
Compensation and benefits, excluding
share-based compensation expense
$
238.5
$
207.2
15.1
%
$
913.2
$
835.0
9.4
%
Share-based compensation expense
10.4
12.9
(19.5
)%
99.4
69.9
42.2
%
Total compensation and benefits (1)
$
248.9
$
220.1
13.1
%
$
1,012.6
$
904.9
11.9
%
Store occupancy costs
102.1
90.2
13.3
%
393.4
359.1
9.6
%
Advertising expense
50.7
43.8
15.7
%
191.3
166.4
15.0
%
Other overhead costs (2)
83.0
74.9
10.9
%
342.8
299.9
14.3
%
Total SG&A expenses
$
484.7
$
429.0
13.0
%
$
1,940.1
$
1,730.3
12.1
%
SG&A per used unit
$
2,345
$
2,380
$
(35
)
$
2,330
$
2,310
$
20
(1) Excludes compensation and benefits related to reconditioning
and vehicle repair service, which are included in cost of sales.
(2) Includes IT expenses, preopening and relocation costs,
insurance, non-CAF bad debt, travel, charitable contributions and
other administrative expenses.
Components of CAF Income and Other CAF
Information
Three Months Ended February 29
or 28
Years Ended February 29 or
28
(In millions)
2020
% (1)
2019
% (1)
2020
% (1)
2019
% (1)
Interest margin:
Interest and fee income
$
283.3
8.4
$
250.6
8.1
$
1,104.1
8.4
$
972.9
8.0
Interest expense
(89.7
)
(2.7
)
(81.1
)
(2.6
)
(358.1
)
(2.7
)
(289.3
)
(2.4
)
Total interest margin
193.6
5.8
169.5
5.5
746.0
5.7
683.6
5.6
Provision for loan losses
(53.0
)
(1.6
)
(42.1
)
(1.4
)
(185.7
)
(1.4
)
(153.8
)
(1.3
)
Total interest margin after provision for
loan losses
140.6
4.2
127.4
4.1
560.3
4.3
529.8
4.4
Total other expense
—
—
—
—
—
—
(0.4
)
—
Total direct expenses
(28.7
)
(0.9
)
(23.7
)
(0.8
)
(104.3
)
(0.8
)
(90.7
)
(0.7
)
CarMax Auto Finance income
$
111.9
3.3
$
103.7
3.3
$
456.0
3.5
$
438.7
3.6
Total average managed receivables
$
13,461.9
$
12,436.8
$
13,105.1
$
12,150.2
Net loans originated
$
1,792.5
$
1,482.5
$
7,089.7
$
6,330.1
Net penetration rate
43.0
%
42.1
%
42.5
%
43.2
%
Weighted average contract rate
7.9
%
8.7
%
8.4
%
8.5
%
Ending allowance for loan losses
$
157.8
$
138.2
$
157.8
$
138.2
Warehouse facility information:
Ending funded receivables
$
2,181.7
$
1,877.0
$
2,181.7
$
1,877.0
Ending unused capacity
$
1,318.3
$
1,623.0
$
1,318.3
$
1,623.0
(1) Annualized percentage of total average managed
receivables.
Earnings Highlights
Three Months Ended February 29
or 28
Years Ended February 29 or
28
(In millions except per share data)
2020
2019
Change
2020
2019
Change
Net earnings
$
214.9
$
192.6
11.6
%
$
888.4
$
842.4
5.5
%
Diluted weighted average shares
outstanding
165.8
170.5
(2.7
)%
166.8
175.9
(5.2
)%
Net earnings per diluted share
$
1.30
$
1.13
15.0
%
$
5.33
$
4.79
11.3
%
Components of Debt (Excluding
Non-Recourse Notes)
(In thousands)
As of February 29 or
28
Debt Description
Maturity Date
2020
2019
Revolving credit facility (1)
June 2024
$
452,740
$
366,529
Term loan
June 2024
300,000
300,000
3.86% Senior notes
April 2023
100,000
100,000
4.17% Senior notes
April 2026
200,000
200,000
4.27% Senior notes
April 2028
200,000
200,000
Financing obligations
Various dates through February 2059
536,739
495,626
Total debt, excluding non-recourse notes
(2) (3)
$
1,789,479
$
1,662,155
(1) In June 2019, the revolving credit facility was renewed, the
maturity date was extended to 2024, and the total capacity was
increased to $1.45 billion. As of February 29, 2020, the unused
capacity of $997.3 million was fully available to us. During March
2020, we made net borrowings under this facility of approximately
$675 million, following which more than $300 million in unused
borrowing capacity remained. (2) Debt balances exclude unamortized
debt issuance costs. (3) As of February 29, 2020, $13.61 billion of
non-recourse notes payable were outstanding related to non-recourse
funding vehicles.
Warehouse Facilities Supporting the
Auto Loan Securitization Program
As of February 29,
2020
(in billions)
Capacity
Warehouse facilities: (1)
August 2020 expiration
$
1.40
September 2020 expiration
0.15
February 2021 expiration
1.95
Combined warehouse facility limit
$
3.50
Unused capacity
$
1.32
(1) Warehouse facility agreements have one-year terms and are
generally renewed annually.
Store Openings
During the fourth quarter of fiscal 2020, we opened three stores
-- two in existing markets (Portland, Oregon and Nashville,
Tennessee) and one in a new market (Ft. Wayne, Indiana). We also
opened a Customer Experience Center in Phoenix, Arizona. In March,
subsequent to the end of the quarter, we opened a store in the
Tampa, Florida market.
While we remain committed to executing our store growth plan for
the long-term benefit of customers and shareholders, we have
decided to pause our store expansion strategy until the Coronavirus
situation stabilizes. Previously, it was our intent to open 13
stores during the fiscal year ending February 28, 2021, and a
similar number of stores in fiscal 2022.
Conference Call
Information
We will host a conference call for investors at 9:00 a.m. ET
today, April 2, 2020. 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
2456902. 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 18, 2020. A telephone replay also
will be available for approximately one week 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
2456902.
First Quarter Fiscal 2021 Earnings
Release Date
We currently plan to release results for the first quarter
ending May 31, 2020, on Friday, June 19, 2020, before the opening
of trading on the New York Stock Exchange. We plan to host a
conference call for investors at 9:00 a.m. ET on that date.
Information on this conference call will be available on our
investor information home page at investors.carmax.com in early
June 2020.
About CarMax
CarMax, the nation’s largest retailer of used cars,
revolutionized the automotive retail industry by driving integrity,
honesty and transparency in every interaction. CarMax continues to
innovate and is currently rolling out an omni-channel experience,
providing customers the option to complete transactions entirely
from home, in store, or in a seamless combination of both. CarMax
has more than 200 stores nationwide, and during the latest fiscal
year sold more than 830,000 used cars and 460,000 wholesale
vehicles at its in-store auctions. With more than 25,000
associates, CarMax is proud to have been recognized for 16
consecutive years as one of the Fortune 100 Best Companies
to Work For®. For more information, visit www.carmax.com.
Forward-Looking
Statements
We caution readers that the statements contained in this release
about our future business plans, operations, challenges,
opportunities or prospects, including without limitation any
statements or factors regarding expected operating capacity, sales,
margins, expenses, liquidity, capital expenditures, debt
obligations, tax rates or earnings, are forward-looking statements
made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. You can identify these
forward-looking statements by the use of words such as
“anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,”
“may,” “outlook,” “plan,” “predict,” “should,” “will” and other
similar expressions, whether in the negative or affirmative. Such
forward-looking statements are based upon management’s current
knowledge and assumptions about future events and involve risks and
uncertainties that could cause actual results to differ materially
from anticipated results. Among the factors that could cause actual
results and outcomes to differ materially from those contained in
the forward-looking statements are the following:
- The effect and consequences of the Coronavirus public health
crisis on matters including U.S. and local economies; our business
operations and continuity; the availability of corporate and
consumer financing; the health and productivity of our associates;
the ability of third-party providers to continue uninterrupted
service; and the regulatory environment in which we operate.
- Changes in the competitive landscape and/or our failure to
successfully adjust to such changes.
- Events that damage our reputation or harm the perception of the
quality of our brand.
- Changes in general or regional U.S. economic conditions.
- Our inability to realize the benefits associated with our
omni-channel initiatives.
- Changes in the availability or cost of capital and working
capital financing, including changes related to the asset-backed
securitization market.
- Our inability to recruit, develop and retain associates and
maintain positive associate relations.
- The loss of key associates from our store, regional or
corporate management teams or a significant increase in labor
costs.
- Security breaches or other events that result in the
misappropriation, loss or other unauthorized disclosure of
confidential customer, associate or corporate information.
- Significant changes in prices of new and used vehicles.
- Changes in economic conditions or other factors that result in
greater credit losses for CAF’s portfolio of auto loan receivables
than anticipated.
- A reduction in the availability of or access to sources of
inventory or a failure to expeditiously liquidate inventory.
- Changes in consumer credit availability provided by our
third-party finance providers.
- Changes in the availability of extended protection plan
products from third-party providers.
- Factors related to the regulatory and legislative environment
in which we operate.
- Factors related to geographic and sales growth, including the
inability to effectively manage our growth.
- The failure of or inability to sufficiently enhance key
information systems.
- The effect of various litigation matters.
- Adverse conditions affecting one or more automotive
manufacturers, and manufacturer recalls.
- The inaccuracy of estimates and assumptions used in the
preparation of our financial statements, or the effect of new
accounting requirements or changes to U.S. generally accepted
accounting principles.
- The volatility in the market price for our common stock.
- The performance of the third-party vendors we rely on for key
components of our business.
- Factors related to seasonal fluctuations in our business.
- The occurrence of severe weather events.
- Factors related to the geographic concentration of our
stores.
For more details on factors that could affect expectations, see
our Annual Report on Form 10-K for the fiscal year ended February
28, 2019, and our quarterly or current reports as filed with or
furnished to the U.S. Securities and Exchange Commission. Our
filings are publicly available on our investor information home
page at investors.carmax.com. Requests for information may also be
made to the Investor Relations Department by email to
investor_relations@carmax.com or by calling (804) 747-0422 x7865.
We undertake no obligation to update or revise any forward-looking
statements after the date they are made, whether as a result of new
information, future events or otherwise.
CARMAX,
INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
Three Months Ended February 29
or 28
Years Ended February 29 or
28
(In thousands except per share data)
2020
% (1)
2019
% (1)
2020
% (1)
2019
% (1)
SALES AND OPERATING REVENUES:
Used vehicle sales
$
4,253,699
85.7
$
3,628,432
84.0
$
17,169,462
84.5
$
15,172,772
83.5
Wholesale vehicle sales
548,324
11.0
543,767
12.6
2,500,042
12.3
2,392,992
13.2
Other sales and revenues
160,467
3.2
146,403
3.4
650,483
3.2
607,336
3.3
NET SALES AND OPERATING
REVENUES
4,962,490
100.0
4,318,602
100.0
20,319,987
100.0
18,173,100
100.0
COST OF SALES:
Used vehicle cost of sales
3,799,956
76.6
3,238,088
75.0
15,349,401
75.5
13,544,033
74.5
Wholesale vehicle cost of sales
444,107
8.9
443,261
10.3
2,045,680
10.1
1,961,959
10.8
Other cost of sales
45,570
0.9
37,875
0.9
202,566
1.0
186,517
1.0
TOTAL COST OF SALES
4,289,633
86.4
3,719,224
86.1
17,597,647
86.6
15,692,509
86.4
GROSS PROFIT
672,857
13.6
599,378
13.9
2,722,340
13.4
2,480,591
13.6
CARMAX AUTO FINANCE INCOME
111,907
2.3
103,705
2.4
456,030
2.2
438,690
2.4
Selling, general and administrative
expenses
484,728
9.8
428,967
9.9
1,940,067
9.5
1,730,275
9.5
Interest expense
22,307
0.4
20,976
0.5
83,007
0.4
75,792
0.4
Other expense (income)
1,096
—
(2,689
)
(0.1
)
(5,690
)
—
408
—
Earnings before income taxes
276,633
5.6
255,829
5.9
1,160,986
5.7
1,112,806
6.1
Income tax provision
61,699
1.2
63,273
1.5
272,553
1.3
270,393
1.5
NET EARNINGS
$
214,934
4.3
$
192,556
4.5
$
888,433
4.4
$
842,413
4.6
WEIGHTED AVERAGE COMMON SHARES:
Basic
163,371
169,500
164,836
174,463
Diluted
165,810
170,480
166,820
175,884
NET EARNINGS PER SHARE:
Basic
$
1.32
$
1.14
$
5.39
$
4.83
Diluted
$
1.30
$
1.13
$
5.33
$
4.79
(1) Percents are calculated as a percentage of net sales and
operating revenues and may not total due to rounding.
CARMAX,
INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
As of
February 29
February 28
(In thousands except share data)
2020
2019 (1)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
$
58,211
$
46,938
Restricted cash from collections on auto
loan receivables
481,043
440,669
Accounts receivable, net
191,090
139,850
Inventory
2,846,416
2,519,455
Other current assets
86,927
67,101
TOTAL CURRENT ASSETS
3,663,687
3,214,013
Auto loan receivables, net
13,551,711
12,428,487
Property and equipment, net
3,069,102
2,828,058
Deferred income taxes
89,842
61,346
Operating lease assets
449,094
—
Other assets
258,746
185,963
TOTAL ASSETS
$
21,082,182
$
18,717,867
LIABILITIES AND SHAREHOLDERS’
EQUITY
CURRENT LIABILITIES:
Accounts payable
$
737,144
$
593,171
Accrued expenses and other current
liabilities
331,738
318,204
Accrued income taxes
1,389
3,784
Current portion of operating lease
liabilities
30,980
—
Short-term debt
40
1,129
Current portion of long-term debt
9,251
10,177
Current portion of non-recourse notes
payable
424,165
385,044
TOTAL CURRENT LIABILITIES
1,534,707
1,311,509
Long-term debt, excluding current
portion
1,778,672
1,649,244
Non-recourse notes payable, excluding
current portion
13,165,384
12,127,290
Operating lease liabilities, excluding
current portion
440,671
—
Other liabilities
393,873
272,796
TOTAL LIABILITIES
17,313,307
15,360,839
Commitments and contingent liabilities
SHAREHOLDERS’ EQUITY:
Common stock, $0.50 par value; 350,000,000
shares authorized; 163,081,376 and 167,478,924 shares issued and
outstanding as of February 29, 2020 and February 28, 2019,
respectively
81,541
83,739
Capital in excess of par value
1,348,988
1,237,153
Accumulated other comprehensive loss
(150,071
)
(68,010
)
Retained earnings
2,488,417
2,104,146
TOTAL SHAREHOLDERS’ EQUITY
3,768,875
3,357,028
TOTAL LIABILITIES AND SHAREHOLDERS’
EQUITY
$
21,082,182
$
18,717,867
(1) In connection with our adoption of ASC 842, the new
accounting standard for leases, during the first quarter of fiscal
2020, certain prior period amounts have been reclassified to
conform to the current period’s presentation. Financing obligations
have been reclassified to Current portion of long-term debt and
Long-term debt, excluding current portion. Capital lease
obligations have been reclassified to Accrued expenses and other
current liabilities and Other liabilities.
CARMAX,
INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Years Ended February 29 or
28
(In thousands)
2020
2019 (1)
OPERATING ACTIVITIES:
Net earnings
$
888,433
$
842,413
Adjustments to reconcile net earnings to
net cash (used in) provided by operating activities:
Depreciation and amortization
215,811
182,247
Share-based compensation expense
108,861
75,011
Provision for loan losses
185,695
153,848
Provision for cancellation reserves
89,272
63,937
Deferred income tax (benefit)
provision
(1,102
)
2,300
Other
3,507
2,825
Net (increase) decrease in:
Accounts receivable, net
(51,240
)
(6,529
)
Inventory
(326,961
)
(128,761
)
Other current assets
(19,843
)
32,890
Auto loan receivables, net
(1,308,919
)
(1,046,631
)
Other assets
4,265
(7,230
)
Net increase (decrease) in:
Accounts payable, accrued expenses and
other current liabilities and accrued income taxes
85,442
86,360
Other liabilities
(109,827
)
(89,709
)
NET CASH (USED IN) PROVIDED BY
OPERATING ACTIVITIES
(236,606
)
162,971
INVESTING ACTIVITIES:
Capital expenditures
(331,896
)
(304,636
)
Proceeds from disposal of property and
equipment
3
692
Purchases of investments
(59,050
)
(6,147
)
Sales of investments
1,579
1,578
NET CASH USED IN INVESTING
ACTIVITIES
(389,364
)
(308,513
)
FINANCING ACTIVITIES:
(Decrease) increase in short-term debt,
net
(1,089
)
1,002
Proceeds from issuances of long-term
debt
6,277,600
4,314,500
Payments on long-term debt
(6,199,793
)
(4,155,718
)
Cash paid for debt issuance costs
(20,102
)
(17,063
)
Payments on finance lease obligations
(4,151
)
(894
)
Issuances of non-recourse notes
payable
11,786,432
10,892,502
Payments on non-recourse notes payable
(10,708,564
)
(10,001,712
)
Repurchase and retirement of common
stock
(567,747
)
(904,726
)
Equity issuances
124,397
58,130
NET CASH PROVIDED BY FINANCING
ACTIVITIES
686,983
186,021
Increase in cash, cash equivalents, and
restricted cash
61,013
40,479
Cash, cash equivalents, and restricted
cash at beginning of year
595,377
554,898
CASH, CASH EQUIVALENTS, AND RESTRICTED
CASH AT END OF YEAR
$
656,390
$
595,377
(1) In connection with the changes to the Consolidated Balance
Sheets as a result of our adoption of ASC 842, the new accounting
standard for leases, during the first quarter of fiscal 2020,
payments on financing obligations have been reclassified to
payments on long-term debt. Prior period amounts have been
reclassified to conform to the current period’s presentation.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200402005205/en/
Investors: Stacy Frole, Vice President, Investor Relations
investor_relations@carmax.com, (804) 747-0422 x7865
Media: pr@carmax.com, (855) 887-2915
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