UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington,  D.C. 20549 

___________

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported):  September  23, 2014

___________

 

CARMAX, INC.

(Exact name of registrant as specified in its charter)

 

 

 

 

 

 

 

 

Virginia 

(State or other jurisdiction

of incorporation)

1-31420

(Commission File Number)

54-1821055

(I.R.S. Employer

Identification No.)

 

 

 

12800 Tuckahoe Creek Parkway 

Richmond,  Virginia

(Address of principal executive offices)

 

23238

(Zip Code)

 

Registrant’s telephone number, including area code: (804) 747-0422

 

Not applicable

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

Item 2.02

Results of Operations and Financial Condition

 

The registrant issued a press release on September 23, 2014, announcing its first quarter results.  The press release is being furnished as Exhibit 99.1 hereto and is incorporated by reference into this Item 2.02.

 

 

Item 9.01

Financial Statements and Exhibits

(d) Exhibits

 

The following exhibit is being furnished pursuant to Item 2.02 above.

99.1

Press release, dated September 23, 2014, issued by CarMax, Inc., entitled “CarMax Reports Record Second Quarter Results.”

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

CARMAX, INC.

(Registrant)

 

 

Dated:  September 23, 2014By:/s/ Thomas W. Reedy

Thomas W. Reedy

Executive Vice President and

Chief Financial Officer

 

EXHIBIT INDEX

 

ece

 

Exhibit No.

Description

99.1

Press release, dated September 23, 2014, issued by CarMax, Inc., entitled “CarMax Reports Record Second Quarter Results.”

 

 

20140831 Q2 Earnings Release_final V2

 

 

 

 

 

 

 

 

 

 

CARMAX REPORTS RECORD SECOND QUARTER RESULTS

 

Richmond, Va., September 23, 2014 – CarMax, Inc. (NYSE:KMX) today reported record second quarter results for the quarter ended August 31, 2014.

 

§

Net sales and operating revenues increased 10.9% to $3.60 billion. 

 

§

Used unit sales in comparable stores increased 0.2%.

 

§

Total used unit sales rose 6.3%.

 

§

Total wholesale unit sales increased 7.4%.

 

§

CarMax Auto Finance (CAF) income increased 9.7% to $92.6 million.

 

§

Net earnings grew 10.2% to $154.5 million.  Net earnings per diluted share rose 12.9% to $0.70.

 

o

Net earnings per diluted share for the current quarter included a $0.06 benefit in connection with our receipt of settlement proceeds in a previously disclosed class action lawsuit.

 

“We are pleased to report record second quarter results, even before considering the benefit of the settlement proceeds,” said Tom Folliard, president and chief executive officer.  “The continued growth in our store base and improvements across our used, wholesale and CAF operations, as well as our share repurchase program, all contributed to our record second quarter earnings per share.”

 

Second Quarter Business Performance Review

 

Sales.  Total used vehicle unit sales grew 6.3% and comparable store used unit sales increased 0.2% versus the prior year’s second quarter.  This growth was on top of increases of 21.1% in total used units and 15.9% in comparable store used units in last year’s second quarter.  While we experienced our fifth consecutive quarter of improved customer traffic in comparable stores, sales were tempered by the effect of a calendar shift.  We had one fewer Saturday this quarter compared with last year’s second quarter, which we estimate adversely affected comparable store used unit sales growth by approximately 1%. 

 

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 18.5% in the second quarter of fiscal 2014 to 13.8% in this year’s second quarter. 

-more-

 

 

 

 

Wholesale vehicle unit sales grew 7.4% versus the second quarter of fiscal 2014.  Wholesale unit sales continued to benefit from a stronger wholesale vehicle buy rate and the addition of new stores.

 

Other sales and revenues increased $7.7 million, or 10.8%, year-over-year.  Extended protection plan (EPP) revenues (which includes extended service plan and guaranteed asset protection revenues) declined $2.1 million versus the prior year’s quarter due to higher estimated cancellation reserve rates and a lower EPP penetration rate, partially offset by the growth in our store base.  Net third-party finance fees improved $8.5 million versus last year’s second quarter primarily due to the reduction in the percentage of sales financed by third-party subprime providers. 

 

Gross Profit.  Total gross profit increased 6.6% to $463.3 million.  Used vehicle gross profit rose 6.2%, 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 10.5% versus the prior year’s quarter, driven by the combination of the 7.4% increase in wholesale unit sales and an improvement in wholesale vehicle gross profit per unit, which rose 2.9% or $25 per unit.  Other gross profit rose 2.0% reflecting the improvement in net third-party finance fees, partially offset by the change in EPP revenues and a decrease in service department gross profits.  Service department gross profits were adversely affected by our relatively flat comparable store used unit sales growth and the resulting deleverage of service overhead costs.

 

SG&A.  SG&A expenses increased 5.1% to $297.6 million.  SG&A was reduced by $20.9 million, which represented our receipt of settlement proceeds in a class action lawsuit related to the economic loss associated with certain Toyota vehicles.  Excluding this item, SG&A expenses increased 12.5% year-over-year, primarily due to the 15% increase in our store base since the beginning of last year’s second quarter (representing the addition of 18 stores), as well as a $6.4 million increase in share-based compensation expense.  Excluding the legal settlement gain, SG&A per retail unit rose $116 to $2,183.

 

CarMax Auto Finance.(1)  CAF income increased 9.7% to $92.6 million, driven by an increase in average managed receivables, partly offset by a lower total interest margin percentage.  Average managed receivables grew 18.5% to $7.72 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 6.6% of average managed receivables in the current quarter from 7.0% in last year’s second quarter. 

 

We continued our test to originate loans for customers who typically would be financed by our third-party subprime providers.  During the second quarter of fiscal 2015, we originated $14.8 million of loans in this test, representing 0.6% of retail unit sales.  As of August 31, 2014, a total of $44.4 million of loans had been originated in this test.

 

Store Openings.  During the second quarter of fiscal 2015, we opened four stores, including three stores in new markets (Madison, Wisconsin; Lynchburg, Virginia; and Portland, Oregon) and one in an existing market (Dallas, Texas).  

 

Share Repurchase Program.  During the second quarter, we repurchased 4.0 million shares of common stock for $201.0 million pursuant to our share repurchase program.  As of August 31, 2014, we had $907.0 million 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.

 

 

-more-

 

 

 

 

Supplemental Financial Information

Amounts and percentage calculations may not total due to rounding.

 

Sales Components

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended August 31

Six Months Ended August 31

(In millions)

 

2014

2013

Change

2014

2013

Change

Used vehicle sales

 

$
2,920.2 

 

$
2,639.5 

 
10.6 

%

$
5,980.5 

 

$
5,341.3 

 
12.0 

%

New vehicle sales

 

 
69.9 

 

 
60.0 

 
16.6 

%

 
139.7 

 

 
112.4 

 
24.3 

%

Wholesale vehicle sales

 

 
530.3 

 

 
474.9 

 
11.7 

%

 
1,075.5 

 

 
965.6 

 
11.4 

%

Other sales and revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Extended protection plan revenues

 

 
63.0 

 

 
65.0 

 
(3.2)

%

 
126.7 

 

 
129.6 

 
(2.3)

%

Service department sales

 

 
28.6 

 

 
27.3 

 
4.7 

%

 
56.9 

 

 
54.7 

 
4.1 

%

Third-party finance fees, net

 

 
(12.7)

 

 
(21.2)

 
39.9 

%

 
(30.0)

 

 
(47.0)

 
36.2 

%

Total other sales and revenues

 

 
78.8 

 

 
71.1 

 
10.8 

%

 
153.6 

 

 
137.3 

 
11.9 

%

Total net sales and operating revenues

 

$
3,599.2 

 

$
3,245.6 

 
10.9 

%

$
7,349.4 

 

$
6,556.6 

 
12.1 

%

 

 

 

 

 

Unit Sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended August 31

Six Months Ended August 31

 

2014

 

2013

 

% Change

 
2014 

 

2013

 

% Change

Used vehicles

 
143,325 

 

 
134,854 

 
6.3 

%

 

 
293,853 

 

 
272,008 

 
8.0 

%

New vehicles

 
2,581 

 

 
2,187 

 
18.0 

%

 

 
5,178 

 

 
4,136 

 
25.2 

%

Wholesale vehicles

 
97,989 

 

 
91,243 

 
7.4 

%

 

 
195,087 

 

 
179,599 

 
8.6 

%

 

 

 

Average Selling Prices

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended August 31

Six Months Ended August 31

 

2014

 

2013

 

% Change

2014

2013

 

% Change

Used vehicles

$
20,215 

 

$
19,428 

 
4.1 

%

 

$
20,193 

 

$
19,485 

 
3.6 

%

New vehicles

$
26,991 

 

$
27,313 

 
(1.2)

%

 

$
26,875 

 

$
27,066 

 
(0.7)

%

Wholesale vehicles

$
5,249 

 

$
5,044 

 
4.1 

%

 

$
5,349 

 

$
5,213 

 
2.6 

%

 

 

Vehicle Sales Changes

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended August 31

Six Months Ended
August 31

 

2014

2013

2014

2013

Used vehicle units

 
6.3% 

 
21.1% 

 
8.0% 

 
21.6% 

Used vehicle revenues

 
10.6% 

 
20.4% 

 
12.0% 

 
21.9% 

 

 

 

 

 

 

 

 

 

Wholesale vehicle units

 
7.4% 

 
10.2% 

 
8.6% 

 
8.0% 

Wholesale vehicle revenues

 
11.7% 

 
8.7% 

 
11.4% 

 
6.7% 

 

 

-more-

 

 

 

Comparable Store Used Vehicle Sales Changes (1)

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended August 31

Six Months Ended
August 31

 

2014

2013

2014

2013

Used vehicle units

 
0.2% 

 
15.9% 

 
1.8% 

 
16.3% 

Used vehicle revenues

 
4.2% 

 
15.3% 

 
5.4% 

 
16.7% 

 

 

 (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 August 31

Six Months Ended August 31

 

(In millions)

2014

%  (1)

2013

%  (1)

2014

%  (1)

2013

%  (1)

Net sales and operating revenues

$
3,599.2 

 
100.0 

 

$
3,245.6 

 
100.0 

 

$
7,349.4 

 
100.0 

 

$
6,556.6 

 
100.0 

 

Gross profit

$
463.3 

 
12.9 

 

$
434.7 

 
13.4 

 

$
965.1 

 
13.1 

 

$
882.8 

 
13.5 

 

CarMax Auto Finance income

$
92.6 

 
2.6 

 

$
84.4 

 
2.6 

 

$
187.2 

 
2.5 

 

$
171.4 

 
2.6 

 

Selling, general, and administrative

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

expenses

$
297.6 

 
8.3 

 

$
283.2 

 
8.7 

 

$
611.1 

 
8.3 

 

$
573.4 

 
8.7 

 

Interest expense

$
7.4 

 
0.2 

 

$
7.8 

 
0.2 

 

$
15.0 

 
0.2 

 

$
15.6 

 
0.2 

 

Earnings before income taxes

$
250.6 

 
7.0 

 

$
227.1 

 
7.0 

 

$
525.7 

 
7.2 

 

$
464.4 

 
7.1 

 

Net earnings

$
154.5 

 
4.3 

 

$
140.3 

 
4.3 

 

$
324.2 

 
4.4 

 

$
286.9 

 
4.4 

 

 

 

 

(1)

Calculated as a percentage of net sales and operating revenues.

 

Gross Profit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended August 31

Six Months Ended August 31

(In millions)

2014

2013

Change

2014

2013

Change

Used vehicle gross profit

$
311.5 

 

$
293.2 

 

 
6.2 

%

$
645.6 

 

$
597.1 

 

 
8.1 

%

New vehicle gross profit

 
2.1 

 

 
1.2 

 

 
71.0 

%

 
3.9 

 

 
2.3 

 

 
71.2 

%

Wholesale vehicle gross profit

 
85.7 

 

 
77.5 

 

 
10.5 

%

 
187.2 

 

 
164.0 

 

 
14.2 

%

Other gross profit

 
64.1 

 

 
62.9 

 

 
2.0 

%

 
128.3 

 

 
119.5 

 

 
7.4 

%

Total

$
463.3 

 

$
434.7 

 

 
6.6 

%

$
965.1 

 

$
882.8 

 

 
9.3 

%

 

 

 

Gross Profit per Unit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended August 31

Six Months Ended August 31

 

2014

2013

2014

2013

 

$ per unit(1)

%(2)

 

$ per unit(1)

%(2)

 

$ per unit(1)

%(2)

 

$ per unit(1)

%(2)

 

Used vehicle gross profit

$
2,173 

 
10.7 

 

$
2,174 

 
11.1 

 

$
2,197 

 
10.8 

 

$
2,195 

 
11.2 

 

New vehicle gross profit

$
803 

 
3.0 

 

$
554 

 
2.0 

 

$
756 

 
2.8 

 

$
553 

 
2.0 

 

Wholesale vehicle gross profit

$
874 

 
16.2 

 

$
849 

 
16.3 

 

$
960 

 
17.4 

 

$
913 

 
17.0 

 

Other gross profit

$
440 

 
81.4 

 

$
459 

 
88.4 

 

$
429 

 
83.5 

 

$
433 

 
87.0 

 

Total gross profit

$
3,176 

 
12.9 

 

$
3,172 

 
13.4 

 

$
3,227 

 
13.1 

 

$
3,197 

 
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.

 

 

-more-

 

 

 

SG&A Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended August 31

Six Months Ended August 31

(In millions)

2014

2013

Change

2014

2013

Change

Compensation and benefits (1)

$
181.5 

 

$
160.9 

 

 
12.8 

%

$
360.5 

 

$
333.0 

 

 
8.3 

%

Store occupancy costs

 
60.0 

 

 
54.5 

 

 
10.1 

%

 
118.3 

 

 
107.0 

 

 
10.6 

%

Advertising expense

 
29.4 

 

 
26.5 

 

 
10.9 

%

 
60.1 

 

 
53.6 

 

 
12.1 

%

Other overhead costs (2)

 
26.7 

 

 
41.3 

 

 
(35.4)

%

 
72.2 

 

 
79.8 

 

 
(9.5)

%

Total SG&A expenses

$
297.6 

 

$
283.2 

 

 
5.1 

%

$
611.1 

 

$
573.4 

 

 
6.6 

%

SG&A per retail unit

$
2,040 

 

$
2,067 

 

$
(27)

 

$
2,044 

 

$
2,076 

 

$
(32)

 

 

 

(1)Excludes compensation and benefits related to reconditioning and vehicle repair service, which are included in cost of sales.

(2)Includes IT expenses, insurance, non-CAF bad debt, travel, preopening and relocation costs, charitable contributions and other administrative expenses.  Costs for the three and six months ended August 31, 2014, were reduced by $20.9 million in connection with the receipt of settlement proceeds in a class action lawsuit.

 

Components of CAF Income and Other CAF Information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended August 31

Six Months Ended August 31

(In millions)

 

 

2014

 

%  (1)

 

 

2013

 

% (1)

 

 

2014

 

%  (1)

 

 

2013

 

% (1)

 

Interest margin:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and fee income

 

$
150.7 

 
7.8 

 

$
137.2 

 
8.4 

 

$
297.6 

 
7.9 

 

$
270.7 

 
8.5 

 

Interest expense

 

 
(23.9)

 
(1.2)

 

 
(22.6)

 
(1.4)

 

 
(47.0)

 
(1.2)

 

 
(45.4)

 
(1.4)

 

Total interest margin

 

 
126.8 

 
6.6 

 

 
114.6 

 
7.0 

 

 
250.6 

 
6.6 

 

 
225.3 

 
7.1 

 

Provision for loan losses

 

 
(20.4)

 
(1.1)

 

 
(18.0)

 
(1.1)

 

 
(36.2)

 
(1.0)

 

 
(29.3)

 
(0.9)

 

Total interest margin after provision

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

for loan losses

 

 
106.4 

 
5.5 

 

 
96.6 

 
5.9 

 

 
214.4 

 
5.7 

 

 
196.0 

 
6.2 

 

Other income

 

 

 ―

 

 ―

 

 
0.1 

 

 ―

 

 

 ―

 

 ―

 

 
0.1 

 

 ―

 

Total direct expenses

 

 
(13.8)

 
(0.7)

 

 
(12.3)

 
(0.7)

 

 
(27.2)

 
(0.7)

 

 
(24.7)

 
(0.8)

 

CarMax Auto Finance income

 

$
92.6 

 
4.8 

 

$
84.4 

 
5.2 

 

$
187.2 

 
5.0 

 

$
171.4 

 
5.4 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total average managed receivables

 

$
7,724.5 

 

 

 

$
6,516.3 

 

 

 

$
7,557.3 

 

 

 

$
6,334.4 

 

 

 

Net loans originated

 

$
1,165.3 

 

 

 

$
1,088.0 

 

 

 

$
2,401.7 

 

 

 

$
2,208.2 

 

 

 

Net CAF penetration rate

 

 
40.7 

%

 

 

 
41.4 

%

 

 

 
41.0 

%

 

 

 
41.4 

%

 

 

Weighted average contract rate

 

 
7.0 

%

 

 

 
6.8 

%

 

 

 
7.1 

%

 

 

 
6.9 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending allowance for loan losses

 

$
77.8 

 

 

 

$
65.9 

 

 

 

$
77.8 

 

 

 

$
65.9 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warehouse facility information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending funded receivables

 

$
1,045.0 

 

 

 

$
947.0 

 

 

 

$
1,045.0 

 

 

 

$
947.0 

 

 

 

Ending unused capacity

 

$
1,055.0 

 

 

 

$
753.0 

 

 

 

$
1,055.0 

 

 

 

$
753.0 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Annualized percentage of total average managed receivables.

 

 

 

 

-more-

 

 

 

Earnings Highlights

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended August 31

Six Months Ended August 31

(In millions except per share data)

2014

2013

Change

2014

2013

Change

Net earnings

$
154.5 

 

$
140.3 

 

 
10.2 

%

$
324.2 

 

$
286.9 

 

 
13.0 

%

Diluted weighted average shares outstanding

 
221.1 

 

 
227.6 

 

 
(2.9)

%

 
222.4 

 

 
228.1 

 

 
(2.5)

%

Net earnings per diluted share

$
0.70 

 

$
0.62 

 

 
12.9 

%

$
1.46 

 

$
1.26 

 

 
15.9 

%

 

 

Planned Store Openings

 

We currently plan to open the following stores within 12 months from August 31, 2014:

 

 

 

 

 

 

 

 

 

Location

Television Market

Market Status

Planned Opening Date

Beaverton, Oregon

Portland

Existing

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

Sicklerville, New Jersey

Philadelphia

Existing

Q1 Fiscal 2016

Gainesville, Florida

Gainesville

New

Q1 Fiscal 2016

Cranston, Rhode Island

Providence

Existing

Q2 Fiscal 2016

Parker, Colorado

Denver

Existing

Q2 Fiscal 2016

Loveland, Colorado

Denver

Existing

Q2 Fiscal 2016

Tallahassee, Florida

Tallahassee

New

Q2 Fiscal 2016

Richmond, Texas

Houston

Existing

Q2 Fiscal 2016

 

 

 

 

 

 

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 stores in fiscal 2015 and between 10 and 15 stores 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, September 23, 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 53275084.  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 December 18, 2014.  A telephone replay also will be available through September 30, 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 53275084.

 

Third Quarter Fiscal 2015 Earnings Release Date

 

-more-

 

 

 

 

We currently plan to release results for the third quarter ending November 30, 2014, on Friday, December 19, 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 December 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 139 used car stores in 70 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 stores.

 

-more-

 

 

 

 

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

 

 

   

 

 

-more-

 

 

 

 

 

CARMAX, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended August 31

 

Six Months Ended August 31

(In thousands except per share data)

 

2014

% (1)

 

2013

% (1)

 

2014

% (1)

 

2013

% (1)

SALES AND OPERATING REVENUES:

 

 

 

 

 

 

 

 

 

 

 

 

Used vehicle sales

$
2,920,165 
81.1 

$
2,639,523 
81.3 

$
5,980,506 
81.4 

$
5,341,278 
81.5 

New vehicle sales

 
69,944 
1.9 

 
60,002 
1.8 

 
139,733 
1.9 

 
112,429 
1.7 

Wholesale vehicle sales

 
530,270 
14.7 

 
474,907 
14.6 

 
1,075,515 
14.6 

 
965,566 
14.7 

Other sales and revenues

 
78,815 
2.2 

 
71,120 
2.2 

 
153,636 
2.1 

 
137,336 
2.1 

NET SALES AND OPERATING REVENUES

 
3,599,194 
100.0 

 
3,245,552 
100.0 

 
7,349,390 
100.0 

 
6,556,609 
100.0 

Cost of sales

 
3,135,855 
87.1 

 
2,810,809 
86.6 

 
6,384,320 
86.9 

 
5,673,770 
86.5 

GROSS PROFIT 

 
463,339 
12.9 

 
434,743 
13.4 

 
965,070 
13.1 

 
882,839 
13.5 

CARMAX AUTO FINANCE INCOME 

 
92,574 
2.6 

 
84,422 
2.6 

 
187,189 
2.5 

 
171,441 
2.6 

Selling, general and administrative expenses

 
297,638 
8.3 

 
283,206 
8.7 

 
611,084 
8.3 

 
573,395 
8.7 

Interest expense

 
7,351 
0.2 

 
7,761 
0.2 

 
14,952 
0.2 

 
15,639 
0.2 

Other expense

 
283 

 ―

 
1,073 

 ―

 
560 

 ―

 
832 

 ―

Earnings before income taxes

 
250,641 
7.0 

 
227,125 
7.0 

 
525,663 
7.2 

 
464,414 
7.1 

Income tax provision

 
96,123 
2.7 

 
86,851 
2.7 

 
201,492 
2.7 

 
177,489 
2.7 

NET EARNINGS 

$
154,518 
4.3 

$
140,274 
4.3 

$
324,171 
4.4 

$
286,925 
4.4 

WEIGHTED AVERAGE COMMON SHARES:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 
218,180 

 

 
223,610 

 

 
219,224 

 

 
224,114 

 

Diluted

 
221,070 

 

 
227,634 

 

 
222,351 

 

 
228,093 

 

NET EARNINGS PER SHARE:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$
0.71 

 

$
0.63 

 

$
1.48 

 

$
1.28 

 

Diluted

$
0.70 

 

$
0.62 

 

$
1.46 

 

$
1.26 

 

 

(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)

 

 

 

August 31

February 28

August 31

(In thousands except share data)

 

2014

2014

2013

ASSETS

 

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$
354,600 

 

$
627,901 

 

$
750,032 

 

 

Restricted cash from collections on auto loan receivables

 

 
297,068 

 

 
259,299 

 

 
251,340 

 

 

Accounts receivable, net

 

 
108,859 

 

 
79,923 

 

 
85,549 

 

 

Inventory

 

 
1,708,955 

 

 
1,641,424 

 

 
1,364,016 

 

 

Deferred income taxes

 

 
8,275 

 

 
7,866 

 

 
4,300 

 

 

Other current assets

 

 
38,685 

 

 
26,811 

 

 
26,173 

 

 

TOTAL CURRENT ASSETS 

 

 
2,516,442 

 

 
2,643,224 

 

 
2,481,410 

 

 

Auto loan receivables, net

 

 
7,844,268 

 

 
7,147,848 

 

 
6,665,985 

 

 

Property and equipment, net

 

 
1,753,992 

 

 
1,652,977 

 

 
1,535,431 

 

 

Deferred income taxes

 

 
157,175 

 

 
152,199 

 

 
146,167 

 

 

Other assets

 

 
128,036 

 

 
110,909 

 

 
104,781 

 

 

TOTAL ASSETS 

 

$
12,399,913 

 

$
11,707,157 

 

$
10,933,774 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$
418,269 

 

$
427,492 

 

$
346,152 

 

 

Accrued expenses and other current liabilities

 

 
205,480 

 

 
202,588 

 

 
144,949 

 

 

Accrued income taxes

 

 
244 

 

 
2,438 

 

 
1,808 

 

 

Short-term debt

 

 
2,229 

 

 
582 

 

 
1,739 

 

 

Current portion of finance and capital lease obligations

 

 
20,280 

 

 
18,459 

 

 
17,167 

 

 

Current portion of non-recourse notes payable

 

 
260,425 

 

 
223,938 

 

 
218,104 

 

 

TOTAL CURRENT LIABILITIES 

 

 
906,927 

 

 
875,497 

 

 
729,919 

 

 

Finance and capital lease obligations, excluding current portion

 

 
310,689 

 

 
315,925 

 

 
325,492 

 

 

Non-recourse notes payable, excluding current portion

 

 
7,648,284 

 

 
7,024,506 

 

 
6,512,328 

 

 

Other liabilities

 

 
176,026 

 

 
174,232 

 

 
181,256 

 

 

TOTAL LIABILITIES 

 

 
9,041,926 

 

 
8,390,160 

 

 
7,748,995 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commitments and contingent liabilities

 

 

 

 

 

 

 

 

 

 

 

SHAREHOLDERS’ EQUITY:

 

 

 

 

 

 

 

 

 

 

 

Common stock, $0.50 par value; 350,000,000 shares authorized;

 

 

 

 

 

 

 

 

 

 

 

216,704,250 and 221,685,984 shares issued and outstanding

 

 

 

 

 

 

 

 

 

 

 

as of August 31, 2014 and February 28, 2014, respectively

 

 
108,352 

 

 
110,843 

 

 
111,665 

 

 

Capital in excess of par value

 

 
1,089,317 

 

 
1,038,209 

 

 
1,000,258 

 

 

Accumulated other comprehensive loss

 

 
(44,467)

 

 
(46,271)

 

 
(53,909)

 

 

Retained earnings

 

 
2,204,785 

 

 
2,214,216 

 

 
2,126,765 

 

 

TOTAL SHAREHOLDERS’ EQUITY 

 

 
3,357,987 

 

 
3,316,997 

 

 
3,184,779 

 

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 

 

$
12,399,913 

 

$
11,707,157 

 

$
10,933,774 

 

 

 

# # #

 

 

 

 

 

CARMAX, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended August 31

(In thousands)

 

2014

 

2013

OPERATING ACTIVITIES:

 

 

 

 

 

 

 

Net earnings

 

$
324,171 

 

$
286,925 

 

Adjustments to reconcile net earnings to net cash

 

 

 

 

 

 

 

used in operating activities:

 

 

 

 

 

 

 

  Depreciation and amortization

 

 
55,766 

 

 
49,160 

 

  Share-based compensation expense

 

 
37,778 

 

 
38,002 

 

  Provision for loan losses

 

 
36,208 

 

 
29,318 

 

  Provision for cancellation reserves

 

 
38,463 

 

 
18,324 

 

Deferred income tax benefit

 

 
(6,530)

 

 
(3,200)

 

Loss on disposition of assets and other

 

 
917 

 –

 
930 

 

Net (increase) decrease in:

 

 

 

 

 

 

 

Accounts receivable, net

 

 
(28,936)

 

 
6,412 

 

Inventory

 

 
(67,531)

 

 
153,797 

 

Other current assets

 

 
(11,706)

 

 
(746)

 

Auto loan receivables, net

 

 
(732,628)

 

 
(799,385)

 

Other assets

 

 
(313)

 

 
(6,736)

 

Net decrease in:

 

 

 

 

 

 

 

Accounts payable, accrued expenses and other current

 

 

 

 

 

 

 

liabilities and accrued income taxes

 

 
(36,052)

 

 
(13,913)

 

Other liabilities

 

 
(46,226)

 

 
(22,497)

 

NET CASH USED IN OPERATING ACTIVITIES

 

 
(436,619)

 

 
(263,609)

 

INVESTING ACTIVITIES:

 

 

 

 

 

 

 

Capital expenditures

 

 
(135,293)

 

 
(136,011)

 

Proceeds from sales of assets

 

 
5,829 

 

 
4,716 

 

Increase in restricted cash from collections on auto loan receivables

 

 
(37,769)

 

 
(27,053)

 

Increase in restricted cash in reserve accounts

 

 
(6,640)

 

 
(5,319)

 

Release of restricted cash from reserve accounts

 

 
1,634 

 

 
15,017 

 

(Purchases) sales of money market securities, net

 

 
(8,753)

 

 
1,337 

 

Purchases of trading securities

 

 
(3,107)

 

 
(1,405)

 

Sales of trading securities

 

 
306 

 

 
33 

 

NET CASH USED IN INVESTING ACTIVITIES

 

 
(183,793)

 

 
(148,685)

 

FINANCING ACTIVITIES:

 

 

 

 

 

 

 

Increase in short-term debt, net

 

 
1,647 

 

 
1,384 

 

Payments on finance and capital lease obligations

 

 
(8,712)

 

 
(10,932)

 

Issuances of non-recourse notes payable

 

 
3,803,000 

 

 
3,530,000 

 

Payments on non-recourse notes payable

 

 
(3,142,735)

 

 
(2,654,658)

 

Repurchase and retirement of common stock

 

 
(373,362)

 

 
(179,278)

 

Equity issuances, net

 

 
37,483 

 

 
14,753 

 

Excess tax benefits from share-based payment arrangements

 

 
29,790 

 

 
11,693 

 

NET CASH PROVIDED BY FINANCING ACTIVITIES

 

 
347,111 

 

 
712,962 

 

(Decrease) increase in cash and cash equivalents

 

 
(273,301)

 

 
300,668 

 

Cash and cash equivalents at beginning of year

 

 
627,901 

 

 
449,364 

 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

 

$
354,600 

 

$
750,032 

 

 

 

 

# # #