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Share Name | Share Symbol | Market | Type |
---|---|---|---|
CarMax Group | NYSE:KMX | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.67 | 0.98% | 68.71 | 70.34 | 68.65 | 69.43 | 1,860,155 | 22:03:11 |
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:
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:
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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