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TheStreet Open House

CarMax Reports Record Third Quarter Results

Stocks in this article: KMX

Superstore Openings . During the third quarter of fiscal 2014, we opened three stores, including one in Jackson, Tennessee; one in Brandywine, Maryland (our eighth store in the Baltimore/Washington, D.C. market); and one in the St. Louis, Missouri market. Subsequent to the end of the quarter, we opened our second store in St. Louis and we entered the Philadelphia, Pennsylvania market with two stores.

Share Repurchase Program . During the third quarter, we repurchased 0.3 million shares of common stock for $14.8 million pursuant to our share repurchase program. As of November 30, 2013, we had $400.0 million remaining available for repurchase under the program.

(1) Although CAF benefits from certain indirect overhead expenditures, we have elected not to allocate indirect costs to CAF in order to avoid making arbitrary allocation decisions.

Supplemental Financial Information

Amounts and percentage calculations may not total due to rounding.

                       

Sales Components

 
Three Months Ended November 30 Nine Months Ended November 30
(In millions)     2013  

 

 

2012

      Change     2013       2012       Change
Used vehicle sales $ 2,396.8 $ 2,068.7 15.9 % $ 7,738.1 $ 6,449.6 20.0 %
New vehicle sales 50.1 45.7 9.6 % 162.5 162.5 0.0 %
Wholesale vehicle sales 437.3 427.7 2.2 % 1,402.8 1,332.5 5.3 %
Other sales and revenues:
Extended service plan revenues 48.8 48.6 0.3 % 178.4 152.7 16.8 %
Service department sales 26.1 24.8 5.3 % 80.8 76.4 5.8 %
Third-party finance fees, net       (17.7 )       (13.1 )     (35.3 ) %       (64.6 )       (38.9 )     (66.0 ) %
Total other sales and revenues       57.2         60.4       (5.2 ) %       194.6         190.2       2.3   %
Total net sales and operating revenues     $ 2,941.4       $ 2,602.4       13.0   %     $ 9,498.0       $ 8,134.9       16.8   %
 
               

Comparable Store Used Vehicle Sales Changes (1)

 
Three Months Ended Nine Months Ended
November 30 November 30
      2013     2012     2013     2012
Used vehicle units 10 % 12 % 14 % 5 %
Used vehicle dollars 10 % 13 % 15 % 6 %
 

(1) As of November 30, 2013 and 2012, the number of stores included in the comparable store base were 113 and 106, respectively.

               

Total Used Vehicle Sales Changes

 
Three Months Ended Nine Months Ended
November 30 November 30
      2013     2012     2013     2012
Used vehicle units 15 % 16 % 20 % 9 %
Used vehicle dollars 16 % 17 % 20 % 10 %
 
               

Unit Sales

 
Three Months Ended Nine Months Ended
November 30 November 30
      2013     2012     2013     2012
Used vehicles 122,065 105,815 394,073 329,422
New vehicles 1,818 1,705 5,954 6,164
Wholesale vehicles 82,743 79,747 262,342 246,059
 
               

Average Selling Prices

 
Three Months Ended Nine Months Ended
November 30 November 30
      2013     2012     2013     2012
Used vehicles $ 19,469 $ 19,344 $ 19,480 $ 19,375
New vehicles $ 27,428 $ 26,681 $ 27,176 $ 26,241
Wholesale vehicles $ 5,123 $ 5,214 $ 5,185 $ 5,267
 
                               

Selected Operating Ratios

 
Three Months Ended Nine Months Ended
November 30 November 30
(In millions)     2013     % (1)     2012     % (1)     2013     % (1)     2012     % (1)
Net sales and operating revenues $ 2,941.4 100.0 $ 2,602.4 100.0 $ 9,498.0 100.0 $ 8,134.9 100.0
Gross profit $ 381.7 13.0 $ 345.2 13.3 $ 1,264.6 13.3 $ 1,095.1 13.5
CarMax Auto Finance income $ 83.9 2.9 $ 72.5 2.8 $ 255.3 2.7 $ 223.3 2.7

Selling, general, and administrative expenses

$ 284.4 9.7 $ 257.3 9.9 $ 857.8 9.0 $ 765.6 9.4
Interest expense $ 7.6 0.3 $ 8.1 0.3 $ 23.3 0.2 $ 24.4 0.3
Earnings before income taxes $ 173.2 5.9 $ 152.5 5.9 $ 637.6 6.7 $ 529.2 6.5
Net earnings $ 106.5 3.6 $ 94.7 3.6 $ 393.4 4.1 $ 327.1 4.0
 

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

                       

Gross Profit

 
Three Months Ended Nine Months Ended
November 30 November 30
(In millions)     2013     2012     Change     2013     2012     Change
Used vehicle gross profit $ 262.4 $ 227.0 15.6 % $ 859.5 $ 718.2 19.7 %
New vehicle gross profit 1.1 0.9 30.9 % 3.4 4.1 (15.3 ) %
Wholesale vehicle gross profit 73.4 73.6 (0.2 ) % 237.4 230.5 3.0 %
Other gross profit       44.8       43.7     2.4   %       164.3       142.3     15.4   %
Total     $ 381.7     $ 345.2     10.6   %     $ 1,264.6     $ 1,095.1     15.5   %
 
                               

Gross Profit per Unit

 
Three Months Ended Nine Months Ended
November 30 November 30
      2013     2012     2013     2012
      $ per unit (1)     % (2)     $ per unit (1)     % (2)     $ per unit (1)     % (2)     $ per unit (1)     % (2)
Used vehicle gross profit $ 2,149 10.9 $ 2,146 11.0 $ 2,181 11.1 $ 2,180 11.1
New vehicle gross profit $ 636 2.3 $ 518 1.9 $ 578 2.1 $ 659 2.5
Wholesale vehicle gross profit $ 887 16.8 $ 923 17.2 $ 905 16.9 $ 937 17.3
Other gross profit $ 361 78.3 $ 407 72.4 $ 411 84.4 $ 424 74.8
Total gross profit $ 3,081 13.0 $ 3,211 13.3 $ 3,161 13.3 $ 3,263 13.5
 

(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.

                       

SG&A Expenses

 
Three Months Ended Nine Months Ended
November 30 November 30
(In millions)     2013     2012     Change     2013     2012       Change
Compensation and benefits (1) $ 161.4 $ 144.0 12.1 % $ 494.4 $ 427.1 15.8 %
Store occupancy costs 53.9 51.1 5.4 % 160.9 149.8 7.4 %
Advertising expense 23.4 22.5 3.7 % 77.0 76.7 0.3 %
Other overhead costs (2)       45.7       39.7       15.2   %       125.5       112.0       12.2   %
Total SG&A expenses     $ 284.4     $ 257.3       10.5   %     $ 857.8     $ 765.6       12.0   %
SG&A per unit $ 2,295 $ 2,393 $ (98 ) $ 2,144 $ 2,281 $ (137 )
 

(1) Excludes compensation and benefits related to reconditioning and vehicle repair service, which is 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.

                             

Components of CAF Income and Other CAF Information

 
Three Months Ended November 30 Nine Months Ended November 30
(In millions)     2013     % (1)         2012     % (1)       2013     % (1)       2012     % (1)  
Interest margin:
Interest and fee income $ 138.3 8.1 $ 125.1 9.1 $ 409.0 8.4 $ 368.9 9.3
Interest expense       (22.2 )       (1.3 )       (23.3 )       (1.7 )       (67.6 )       (1.4 )       (72.4 )       (1.8 )
Total interest margin 116.1 6.8 101.8 7.4 341.4 7.0 296.5 7.5
Provision for loan losses       (19.7 )       (1.2 )       (18.1 )       (1.3 )       (49.0 )       (1.0 )       (40.2 )       (1.0 )

Total interest margin after provision for loan losses

96.4 5.7 83.7 6.1 292.4 6.0 256.3 6.5
Other income 0.2 0.1
Total direct expenses       (12.5 )       (0.7 )       (11.4 )       (0.8 )       (37.2 )       (0.8 )       (33.0 )       (0.8 )
CarMax Auto Finance income     $ 83.9         4.9       $ 72.5         5.3       $ 255.3         5.2       $ 223.3         5.7  
 
Total average managed receivables $ 6,805.3 $ 5,477.4 $ 6,491.4 $ 5,266.0
Net loans originated $ 960.6 $ 856.2 $ 3,168.7 $ 2,465.4
Net CAF penetration rate 40.6 % 41.2 % 41.2 % 38.3 %
Weighted average contract rate 7.0 % 7.7 % 6.9 % 8.2 %
 
Ending allowance for loan losses $ 67.9 $ 54.3 $ 67.9 $ 54.3
 
Warehouse facility information:
Ending funded receivables $ 807.0 $ 876.0 $ 807.0 $ 876.0
Ending unused capacity $ 993.0 $ 724.0 $ 993.0 $ 724.0
 

(1) Annualized percent of total average managed receivables.

                       

Earnings Highlights

 
Three Months Ended Nine Months Ended
November 30 November 30
(In millions except per share data)     2013     2012     Change     2013     2012     Change
Net earnings $ 106.5 $ 94.7 12.4 % $ 393.4 $ 327.1 20.3 %
Diluted weighted average shares outstanding 227.4 232.7 (2.3 ) % 227.9 232.0 (1.8 ) %
Net earnings per diluted share $ 0.47 $ 0.41 14.6 % $ 1.73 $ 1.41 22.7 %
 

Planned Superstore Openings

We currently plan to open the following superstores within 12 months from November 30, 2013:

           
Location     Television Market     Market Status     Planned Opening Date
St. Peters, Missouri (1) St. Louis Existing Q4 Fiscal 2014
Newark, Delaware (1) Philadelphia New Q4 Fiscal 2014
King of Prussia, Pennsylvania (1) Philadelphia New Q4 Fiscal 2014
Frederick, Maryland Washington/Baltimore Existing Q4 Fiscal 2014
Elk Grove, California Sacramento Existing Q4 Fiscal 2014
Rochester, New York Rochester New Q1 Fiscal 2015
Dothan, Alabama Dothan New Q1 Fiscal 2015
Mechanicsburg, Pennsylvania Harrisburg/Lancaster Existing Q1 Fiscal 2015
Spokane, Washington Spokane New Q1 Fiscal 2015
Madison, Wisconsin Madison New Q2 Fiscal 2015
Fort Worth, Texas Dallas Existing Q2 Fiscal 2015
Lynchburg, Virginia Roanoke/Lynchburg New Q2 Fiscal 2015
Milwaukie, Oregon Portland New Q2 Fiscal 2015
Beaverton, Oregon Portland New Q3 Fiscal 2015
Tupelo, Mississippi Tupelo New Q3 Fiscal 2015
Reno, Nevada Reno New Q3 Fiscal 2015
Raleigh, North Carolina Raleigh Existing Q3 Fiscal 2015
 

(1) Opened in December 2013.

Normal construction, permitting or other scheduling delays could shift the opening dates of any of these stores into a later period. We currently estimate capital expenditures will total approximately $300 million in fiscal 2014. We expect to open between 10 and 15 superstores in each of the following 2 fiscal years.

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