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CarMax Reports Quarterly Results

SG&A . Selling, general and administrative expenses increased 11% to $254.7 million from $229.9 million in the prior year’s second quarter. The increase primarily reflected the 8% increase in our store base since the beginning of last year’s second quarter (representing the addition of eight stores) and higher growth-related costs resulting from the ramp in our store growth rate. Growth-related costs include pre-opening expenses, relocation expenses, and the cost of building and maintaining management bench strength to support future growth. SG&A per retail unit increased to $2,241 versus $2,197 in the prior year’s quarter mainly due to the costs associated with this year’s higher store growth rate.

Superstore Openings . We plan to open ten superstores in fiscal 2013, double the number opened in fiscal 2012. During the second quarter of fiscal 2013, we opened three used car superstores, entering the Ft. Myers, Florida, market with two stores and opening a third store in the Nashville, Tennessee, market.

Supplemental Financial Information

Sales Components

   

(In millions)

Three Months Ended Six Months Ended

August 31 (1)

August 31 (1)

2012

 

2011

 

Change

2012

 

2011

 

Change

Used vehicle sales $2,192.0 $2,015.0 8.8 % $4,380.9 $4,086.5 7.2 %
New vehicle sales 61.4 46.9 31.0 % 116.9 108.7 7.5 %
Wholesale vehicle sales 437.1 457.9 (4.5 )% 904.8 935.7 (3.3 )%
Other sales and revenues:
Extended service plan revenues 52.9 44.9 17.7 % 104.2 91.3 14.1 %
Service department sales 26.8 26.0 2.9 % 51.6 51.2 0.8 %
Third-party finance fees, net (12.1 )   (2.9 )   (322.4 )% (25.9 )   (6.2 )   (320.2 )%
Total other sales and revenues 67.6     68.1     (0.8 )% 129.9     136.3     (4.7 )%
Net sales and operating revenues $2,758.0     $2,587.8     6.6 % $5,532.4     $5,267.2     5.0 %
 

(1) Percent calculations and amounts shown are based on amounts presented on the attached consolidated statements of earnings and may not sum due to rounding.

Used Vehicle Sales Changes

   
Three Months Ended Six Months Ended
August 31 August 31

2012

 

2011

2012

 

2011

Comparable store vehicle sales:
Used vehicle units 5% (2)% 2% 2%
Used vehicle revenues 5%

5%

4% 8%
 
Total vehicle sales:
Used vehicle units 8% (1)% 6% 3%
Used vehicle revenues

9%

7%

7% 10%
 

Unit Sales

   
Three Months Ended Six Months Ended
August 31 August 31

2012

 

2011

2012

 

2011

Used vehicles 111,316 102,825 223,607 211,336
New vehicles 2,352 1,798 4,459 4,233
Wholesale vehicles 82,771 84,885 166,312 169,947
 

Average Selling Prices

   
Three Months Ended Six Months Ended
August 31 August 31

2012

 

2011

2012

 

2011

Used vehicles $ 19,494 $ 19,408 $ 19,389 $ 19,148
New vehicles $ 25,982 $ 25,927 $ 26,073 $ 25,559
Wholesale vehicles $ 5,133 $ 5,249 $ 5,292 $ 5,359
 

Selected Operating Ratios

   

(In millions)

Three Months Ended Six Months Ended
August 31 August 31

2012

 

% (1)

 

2011

 

% (1)

2012

 

% (1)

 

2011

 

% (1)

 
Net sales and operating revenues $ 2,758.0 100.0 % $ 2,587.8 100.0 % $ 5,532.4 100.0 % $ 5,267.2 100.0 %
Gross profit $ 368.0 13.3 % $ 354.3 13.7 % $ 749.9 13.6 % $ 737.4 14.0 %
CarMax Auto Finance income $ 75.7 2.7 % $ 63.8 2.5 % $ 150.9 2.7 % $ 133.5 2.5 %

Selling, general, and administrative expenses

$ 254.7 9.2 % $ 229.9 8.9 % $ 508.3 9.2 % $ 471.5 9.0 %
Interest expense $ 8.2 0.3 % $ 8.5 0.3 % $ 16.3 0.3 % $ 17.0 0.3 %
Earnings before income taxes $ 181.1 6.6 % $ 179.9 7.0 % $ 376.7 6.8 % $ 382.5 7.3 %
Net earnings $ 111.6 4.0 % $ 111.2 4.3 % $ 232.4 4.2 % $ 236.7 4.5 %
 

(1) Calculated as the ratio of the applicable amount to net sales and operating revenues.

Gross Profit

   

(In millions)

Three Months Ended Six Months Ended
August 31 August 31

2012

 

2011

 

Change

2012

 

2011

 

Change

Used vehicle gross profit $ 241.8 $ 224.0 8.0 % $ 491.2 $ 465.2 5.6 %
New vehicle gross profit 1.6 1.7 (6.7 )% 3.2 3.1 1.1 %
Wholesale vehicle gross profit 75.1 78.8 (4.8 )% 157.0 165.0 (4.9 )%
Other gross profit   49.5     49.8   (0.5 )%   98.6     104.0   (5.2 )%
Total gross profit $ 368.0   $ 354.3   3.9 % $ 749.9   $ 737.4   1.7 %
 

Gross Profit per Unit

   
Three Months Ended Six Months Ended
August 31 August 31

2012

 

2011

2012

 

2011

$

/unit (1)

 

% (2)

$

/unit (1)

 

% (2)

  $

/unit (1)

  % (2)   $

/unit (1)

  % (2)  
Used vehicle gross profit $ 2,172 11.0 % $ 2,178 11.1 % $ 2,197 11.2 % $ 2,201 11.4 %
New vehicle gross profit $ 676 2.6 % $ 948 3.6 % $ 713 2.7 % $ 744 2.9 %
Wholesale vehicle gross profit $ 907 17.2 % $ 929 17.2 % $ 944 17.3 % $ 971 17.6 %
Other gross profit $ 436 73.3 % $ 476 73.1 % $ 432 75.9 % $ 482 76.3 %
Total gross profit $ 3,237 13.3 % $ 3,386 13.7 % $ 3,288 13.6 % $ 3,421 14.0 %
 

(1) Calculated as category gross profit divided by its respective units sold, except the other and total categories, which are divided by total retail units sold. (2) Calculated as a percentage of its respective sales or revenue.

Components of CAF Income and Other CAF Information

   

(In millions)

Three Months Ended Six Months Ended
August 31 August 31

2012

 

2011

2012

 

2011

$

 

% (1)

$

 

% (1)

$

 

% (1)

$

 

% (1)

Interest and fee income $ 123.5 9.4 $ 111.8 9.7 $ 243.8 9.4 $ 219.7 9.8
Interest expense   (23.9 )   (1.8 )     (26.2 )   (2.3 )     (49.0 )   (1.9 )     (54.7 )   (2.4 )
Total interest margin 99.6 7.6 85.6 7.5 194.8 7.5 165.0 7.3
Provision for loan losses   (12.9 )   (1.0 )     (10.8 )   (0.9 )     (22.1 )   (0.9 )     (9.8 )   (0.4 )

Total interest margin after provision for loan losses

86.7 6.6 74.8 6.5 172.7 6.7 155.2 6.9
Other (loss) gain (0.2 ) -- 0.4 -- (0.2 ) -- 1.1 --
Direct CAF expenses   (10.8 )   (0.8 )     (11.4 )   (1.0 )     (21.6 )   (0.8 )     (22.8 )   (1.0 )
CarMax Auto Finance income $ 75.7     5.8     $ 63.8     5.6     $ 150.9     5.8     $ 133.5     5.9  
 
Total average managed receivables $ 5,245.4 $ 4,596.6 $ 5,160.3 $ 4,492.2
Net loans originated $ 822.4 $ 771.9 $ 1,609.2 $ 1,461.2
 
Ending allowance for loan losses $ 49.5 $ 36.2 $ 49.5 $ 36.2
 
Warehouse facility information:
Ending funded receivables $ 1,066.0 $ 1,559.0 $ 1,066.0 $ 1,559.0
Ending unused capacity $ 534.0 $ 441.0 $ 534.0 $ 441.0
 

(1) Annualized percent of total average managed receivables.

Earnings Highlights

   

(In millions except per share data)

Three Months Ended Six Months Ended

 

August 31 August 31

2012

 

2011

 

Change

2012

 

2011

 

Change

Net earnings $ 111.6 $ 111.2 0.4% $ 232.4 $ 236.7 (1.8)%
Diluted weighted average shares outstanding

231.7

230.7

0.4%

231.7

230.5

0.6 %

Net earnings per diluted share $ 0.48 $ 0.48 -- $ 1.00 $ 1.03 (2.9)%
 

Planned Store Openings

We currently plan to open the following superstores within 12 months from August 31, 2012:

     
Television Market Planned
Location   Market   Status   Opening Date
Des Moines, Iowa Des Moines New Q3 Fiscal 2013
Oxnard, California Los Angeles Existing Q3 Fiscal 2013
Denver (Federal Heights), Colorado Denver New Q3 Fiscal 2013
Denver (Littleton), Colorado Denver New Q4 Fiscal 2013
Jacksonville, Florida Jacksonville Existing Q4 Fiscal 2013
Harrisonburg, Virginia Harrisonburg New Q1 Fiscal 2014
Columbus, Georgia Columbus New Q1 Fiscal 2014
Savannah, Georgia Savannah New Q1 Fiscal 2014
Houston, Texas Houston Existing Q2 Fiscal 2014
Sacramento, California Sacramento Existing Q2 Fiscal 2014
Frederick, Maryland Washington/Baltimore Existing Q2 Fiscal 2014
 

Conference Call Information

We will host a conference call for investors at 9:00 a.m. ET today, September 20, 2012. 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 89958527. A live webcast of the call will be available on our investor information home page at investor.carmax.com and at www.streetevents.com.

A webcast replay of the call will be available at investor.carmax.com beginning at approximately 1:00 p.m. ET on September 20, 2012, through December 19, 2012. A telephone replay also will be available through September 28, 2012, 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 89958527.

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