This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

CarMax Reports Record Third Quarter Results

Gross Profit . Total gross profit increased 14% to $345.2 million from $303.2 million in the third quarter of fiscal 2012, primarily reflecting the increased used and wholesale vehicle unit sales, as well as higher other gross profit.

Used vehicle gross profit rose 15% to $227.0 million driven by the 16% increase in used unit sales. Used vehicle gross profit per unit was relatively consistent at $2,146 versus $2,171 in last year’s third quarter.

Wholesale gross profit increased 11% to $73.6 million, driven by the 10% increase in wholesale unit sales. Wholesale vehicle gross profit per unit remained stable at $923 compared with $914 in the prior year quarter.

Other gross profit rose 18% to $43.7 million, as improved ESP and service department profits were partially offset by the lower net third-party finance fees.

CarMax Auto Finance . CAF income increased 16% to $72.5 million compared with $62.6 million in last year’s third quarter. The growth in CAF income was largely attributable to the 15% increase in average managed receivables, which grew to $5.48 billion from $4.77 billion in the prior year period. The increase in average managed receivables reflected the rise in CAF origination volume throughout fiscal 2012 and fiscal 2013 as we transitioned back to our pre-recession origination strategy, higher average amounts financed and the growth in retail unit sales.

The allowance for loan losses was 1.0% of managed receivables as of November 30, 2012, compared with 0.9% as of November 30, 2011. Continued favorable loss experience partially offset the effect of the change in credit mix resulting from the transition in origination strategy.

SG&A . Selling, general and administrative expenses increased 14% to $257.3 million from $225.8 million in the prior year’s third quarter. The increase primarily reflected the combination of the 9% increase in our store base since the beginning of last year’s third quarter (representing the addition of 10 stores) and higher variable selling costs resulting from the 12% increase in comparable store used unit sales. SG&A per retail unit declined to $2,393 versus $2,436 in the prior year’s quarter as the leverage resulting from the comparable store unit sales growth was partially offset by higher costs related to growing our store base.

Superstore Openings . As of November 30, 2012, we had opened eight of the ten used car superstores that we plan to open in fiscal 2013. During the third quarter, we opened three stores, entering the Des Moines and Denver markets, and adding our tenth store in the Los Angeles market.

Share Repurchase Program . During the third quarter of fiscal 2013, we repurchased 1.7 million shares of common stock for $60.2 million pursuant to our share repurchase program. The repurchase activity had no effect on reported third quarter net earnings per share.

Supplemental Financial Information

Sales Components

 
  Three Months Ended   Nine Months Ended
November 30 (1) November 30 (1)
(In millions)   2012

 

2011

  Change   2012   2011   Change
Used vehicle sales $ 2,068.7 $ 1,766.7   17.1 % $ 6,449.6   $ 5,853.2   10.2 %
New vehicle sales 45.7 46.0 (0.7) % 162.5 154.7 5.0 %
Wholesale vehicle sales 427.7 390.3 9.6 % 1,332.5 1,325.9 0.5 %
Other sales and revenues:
Extended service plan revenues 48.6 39.8 22.2 % 152.7 131.0 16.6 %
Service department sales 24.8 23.5 5.9 % 76.4 74.6 2.4 %
Third-party finance fees, net     (13.1)     (5.6)   (131.2) %     (38.9)     (11.8)   (229.8) %
Total other sales and revenues     60.4     57.6   4.9 %     190.2     193.9   (1.9) %
Total net sales and operating revenues   $ 2,602.4   $ 2,260.5   15.1 %   $ 8,134.9   $ 7,527.8   8.1 %
 

(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.

Comparable Store Used Vehicle Sales Changes

 
  Three Months Ended   Nine Months Ended
November 30 November 30
    2012

 

2011

  2012

 

2011

Used vehicle units 12 % (3) % 5 % 0 %
Used vehicle dollars 13 % 3 % 6 % 7 %
 

Total Used Vehicle Sales Changes

 
  Three Months Ended   Nine Months Ended
November 30 November 30
    2012   2011   2012

 

2011

Used vehicle units 16 %   (1) % 9 % 2 %
Used vehicle dollars 17 % 5 % 10 % 8 %
 

Unit Sales

     
  Three Months Ended

 

Nine Months Ended

November 30

 

November 30

    2012   2011

 

2012

 

2011

Used vehicles 105,815 90,975 329,422 302,311
New vehicles 1,705 1,719 6,164 5,952
Wholesale vehicles 79,747 72,805 246,059 242,752
 

Average Selling Prices

 
  Three Months Ended   Nine Months Ended
November 30 November 30
   

2012

 

2011

  2012   2011
Used vehicles $ 19,344   $ 19,221 $ 19,375   $ 19,170
New vehicles $ 26,681 $ 26,611 $ 26,241 $ 25,863
Wholesale vehicles $ 5,214 $ 5,215 $ 5,267 $ 5,316
 

Selected Operating Ratios

             
  Three Months Ended Nine Months Ended
November 30 November 30
(In millions)   2012   % (1)   2011 (2)   % (1)   2012   % (1)   2011 (2)   % (1)
Net sales and operating revenues $ 2,602.4 100.0 $ 2,260.5 100.0 $ 8,134.9 100.0 $ 7,527.8 100.0
Gross profit $ 345.2 13.3 $ 303.2 13.4 $ 1,095.1 13.5 $ 1,040.6 13.8
CarMax Auto Finance income $ 72.5 2.8 $ 62.6 2.8 $ 223.3 2.7 $ 196.1 2.6
Selling, general, and administrative
expenses $ 257.3 9.9 $ 225.8 10.0 $ 765.6 9.4 $ 697.3 9.3
Interest expense $ 8.1 0.3 $ 8.4 0.4 $ 24.4 0.3 $ 25.4 0.3
Earnings before income taxes $ 152.5 5.9 $ 131.6 5.8 $ 529.2 6.5 $ 514.2 6.8
Net earnings $ 94.7 3.6 $ 82.1 3.6 $ 327.1 4.0 $ 318.8 4.2
 

(1)

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

(2)

As disclosed in our Annual Report on Form 10-K for the fiscal year ended February 29, 2012, fiscal 2012 reflects the revisions to correct our accounting for sale-leaseback transactions.

Gross Profit

           
Three Months Ended Nine Months Ended
November 30 November 30
(In millions)   2012   2011   Change   2012   2011   Change
Used vehicle gross profit $ 227.0 $ 197.5 15.0 % $ 718.2 $ 662.7 8.4 %
New vehicle gross profit 0.9 2.0 (55.9) % 4.1 5.1 (21.1) %
Wholesale vehicle gross profit 73.6 66.5 10.6 % 230.5 231.6 (0.4) %
Other gross profit     43.7     37.2   17.5 %     142.3     141.2   0.8 %
Total   $ 345.2   $ 303.2   13.9 %   $ 1,095.1   $ 1,040.6   5.2 %
 

Gross Profit per Unit

               
Three Months Ended Nine Months Ended
November 30 November 30
    2012   2011   2012   2011
    $ per unit (1)   % (2)   $ per unit (1)   % (2)   $ per unit (1)   % (2)   $ per unit (1)   % (2)
Used vehicle gross profit $ 2,146 11.0 $ 2,171 11.2 $ 2,180 11.1 $ 2,192 11.3
New vehicle gross profit $ 518 1.9 $ 1,164 4.4 $ 659 2.5 $ 865 3.3
Wholesale vehicle gross profit $ 923 17.2 $ 914 17.0 $ 937 17.3 $ 954 17.5
Other gross profit $ 407 72.4 $ 401 64.6 $ 424 74.8 $ 458 72.8
Total gross profit $ 3,211 13.3 $ 3,271 13.4 $ 3,263 13.5 $ 3,376 13.8
 

(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

           
Three Months Ended November 30

 

Nine Months Ended November 30

(In millions)   2012   % (1)

 

2011

  % (1)

 

2012

  % (1)

 

2011

  % (1)
Interest margin:
Interest and fee income $ 125.1 9.1 $ 114.3 9.6 $ 368.9 9.3 $ 334.0 9.7
Interest expense     (23.3)     (1.7)     (25.6)     (2.2)     (72.4)   (1.8)     (80.3)   (2.3)
Total interest margin 101.8 7.4 88.7 7.4 296.5 7.5 253.7 7.4
Provision for loan losses     (18.1)     (1.3)     (15.1)     (1.3)     (40.2)   (1.0)     (24.9)   (0.7)
Total interest margin after
provision for loan losses     83.7     6.1     73.6     6.2     256.3   6.5     228.8   6.7
 
Other income 0.2 0.3 1.4

 

Total direct expenses     (11.4)     (0.8)     (11.3)     (0.9)     (33.0)   (0.8)     (34.1)   (1.0)
CarMax Auto Finance income   $ 72.5     5.3   $ 62.6     5.3   $ 223.3   5.7   $ 196.1   5.7
 
Total average managed
receivables $ 5,477.4 $ 4,770.9 $ 5,266.0 $ 4,585.1
Net loans originated $ 856.2 $ 664.0 $ 2,465.4 $ 2,125.2
Net CAF penetration rate 41.2 % 38.1 % 38.3 % 36.7 %
Weighted average contract rate 7.7 % 8.7 % 8.2 % 8.8 %
 
Ending allowance for loan losses $ 54.3 $ 41.4 $ 54.3 $ 41.4
 
Warehouse facility information:
Ending funded receivables $ 876.0 $ 876.0 $ 876.0 $ 876.0
Ending unused capacity $ 724.0 $ 724.0 $ 724.0 $ 724.0
 

(1) Annualized percent of total average managed receivables.

SG&A Expenses

       
Three Months Ended Nine Months Ended
November 30 November 30
(In millions)   2012   2011 (1)   2012   2011 (1)
Compensation and benefits (2) $ 144.0 $ 124.0 $ 427.1 $ 384.2
Store occupancy costs 51.1 48.5 149.8 142.4
Advertising expense 22.5 22.4 76.7 75.4
Other overhead costs (3)     39.7     30.9     112.0     95.3
Total SG&A expenses   $ 257.3   $ 225.8   $ 765.6   $ 697.3
 
(1)   As disclosed in our Annual Report on Form 10-K for the fiscal year ended February 29, 2012, fiscal 2012 reflects the revisions to correct our accounting for sale-leaseback transactions.
(2) Excludes compensation and benefits related to reconditioning and vehicle repair service, which is included in cost of sales.
(3) Includes IT expenses, insurance, bad debt, travel, preopening and relocation costs, charitable contributions and other administrative expenses.

Earnings Highlights

           
Three Months Ended Nine Months Ended
November 30 November 30
(In millions except per share data)   2012   2011 (1)   Change   2012   2011 (1)   Change
Net earnings $ 94.7 $ 82.1 15.3 % $ 327.1 $ 318.8 2.6 %
Diluted weighted average shares outstanding 232.7 230.6 0.9 % 232.0 230.5 0.7 %
Net earnings per diluted share $ 0.41 $ 0.36 13.9 % $ 1.41 $ 1.38 2.2 %
 

(1) As disclosed in our Annual Report on Form 10-K for the fiscal year ended February 29, 2012, fiscal 2012 reflects the revisions to correct our accounting for sale-leaseback transactions.

Planned Store Openings

We currently plan to open the following superstores within 12 months from November 30, 2012:

     
Location   Television Market   Market Status   Planned Opening Date
Denver (Littleton), Colorado (1) Denver Existing 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
Jackson, Tennessee Jackson New Q3 Fiscal 2014
Waldorf, Maryland Washington/Baltimore Existing Q3 Fiscal 2014
St. Louis (St. Peters), Missouri St. Louis New Q3 Fiscal 2014
St. Louis (Lindbergh), Missouri St. Louis New Q3 Fiscal 2014
 

(1) Store opened in December 2012.

Conference Call Information

We will host a conference call for investors at 9:00 a.m. ET today, December 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 89964196. 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 December 20, 2012, through April 9, 2013. A telephone replay also will be available through December 31, 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 89964196.

2 of 4

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,172.68 -107.06 -0.62%
S&P 500 1,994.29 -16.11 -0.80%
NASDAQ 4,527.6890 -52.10 -1.14%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs