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CarMax Reports Record Third Quarter Results

Conference Call Information

We will host a conference call for investors at 9:00 a.m. ET today, December 20, 2013. 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 26830857. 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 April 3, 2014. A telephone replay also will be available through December 31, 2013, 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 26830857.

Fourth Quarter and Fiscal Year 2014 Earnings Release Date

We currently plan to release results for the fourth quarter and fiscal year ending February 28, 2014, on Friday, April 4, 2014, before the opening of the New York Stock Exchange. We will 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 March 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 nine consecutive years, is the nation’s largest retailer of used vehicles. Headquartered in Richmond, Va., CarMax currently operates 129 used car superstores in 64 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 twelve months ended February 28, 2013, the company retailed 447,728 used vehicles and sold 324,779 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 general or regional U.S. economic conditions.
  • Changes in the competitive landscape within our industry.
  • 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 related to our third-party financing providers.
  • Significant changes in retail prices for used and new vehicles.
  • A reduction in the availability of or access to sources of inventory.
  • Factors related to the regulatory and legislative environment in which we operate.
  • Events that damage our reputation or harm the perception of the quality of our brand.
  • Security breaches or other events that result in the misappropriation, loss or other unauthorized disclosure of confidential customer or associate information.
  • 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 loss of key employees from our store, regional or corporate management teams or a significant increase in labor costs.
  • The failure of key information systems.
  • The effect of various litigation matters.
  • Adverse conditions affecting one or more automotive manufacturers or manufacturer recalls.
  • The occurrence of severe weather events.
  • Factors related to the seasonal fluctuations in our business.
  • Factors related to the geographic concentration of our superstores.
  • The effect of new accounting requirements or changes to U.S. generally accepted accounting principles.
  • Acts of terrorism, the outbreak of war, or other significant national or international events.

For more details on factors that could affect expectations, see our Annual Report on Form 10-K for the fiscal year ended February 28, 2013, and our quarterly or current reports as filed with or furnished to the 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 disclaim any intent or obligation to update our forward-looking statements.

 

CARMAX, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

(UNAUDITED)

 

                           
Three Months Ended November 30 Nine Months Ended November 30
(In thousands except per share data)       2013       % (1)       2012     % (1)       2013       % (1)       2012     % (1)
SALES AND OPERATING REVENUES:
Used vehicle sales $ 2,396,840   81.5 $ 2,068,742 79.5 $ 7,738,118   81.5 $ 6,449,613 79.3
New vehicle sales 50,073 1.7 45,693 1.8 162,502 1.7 162,543 2.0
Wholesale vehicle sales 437,272 14.9 427,650 16.4 1,402,838 14.8 1,332,495 16.4
Other sales and revenues       57,222       1.9       60,361     2.3       194,558       2.0       190,219     2.3
NET SALES AND OPERATING REVENUES 2,941,407 100.0 2,602,446 100.0 9,498,016 100.0 8,134,870 100.0
Cost of sales       2,559,686       87.0       2,257,227     86.7       8,233,456       86.7       7,039,743     86.5
GROSS PROFIT 381,721 13.0 345,219 13.3 1,264,560 13.3 1,095,127 13.5
CARMAX AUTO FINANCE INCOME 83,905 2.9 72,454 2.8 255,346 2.7 223,309 2.7
Selling, general and administrative expenses 284,366 9.7 257,282 9.9 857,761 9.0 765,559 9.4
Interest expense 7,649 0.3 8,065 0.3 23,288 0.2 24,360 0.3
Other (loss) income       (411   )         139           (1,243   )         683    
Earnings before income taxes 173,200 5.9 152,465 5.9 637,614 6.7 529,200 6.5
Income tax provision       66,748       2.3       57,784     2.2       244,237       2.6       202,137     2.5
NET EARNINGS     $ 106,452       3.6     $ 94,681     3.6     $ 393,377       4.1     $ 327,063     4.0
WEIGHTED AVERAGE COMMON SHARES:
Basic 223,259 228,904 223,831 228,346
Diluted 227,417 232,656 227,870 232,048
NET EARNINGS PER SHARE:
Basic $ 0.48 $ 0.41 $ 1.76 $ 1.43
Diluted $ 0.47 $ 0.41 $ 1.73 $ 1.41
 

(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)
November 30 February 28 November 30
(In thousands except share data)     2013       2013       2012  
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 664,758 $ 449,364 $ 445,110
Restricted cash from collections on auto loan receivables 246,795 224,287 204,360
Accounts receivable, net 68,027 91,961 62,660
Inventory 1,556,277 1,517,813 1,339,044
Deferred income taxes 2,651 5,193 9,315
Other current assets       20,286         21,513         24,875  
TOTAL CURRENT ASSETS 2,558,794 2,310,131 2,085,364
Auto loan receivables, net 6,892,311 5,895,918 5,552,035
Property and equipment, net 1,588,633 1,428,970 1,411,588
Deferred income taxes 151,281 145,875 147,571
Other assets       112,856         107,708         101,125  
TOTAL ASSETS     $ 11,303,875       $ 9,888,602       $ 9,297,683  
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable $ 367,478 $ 336,721 $ 272,807
Accrued expenses and other current liabilities 138,910 147,821 116,629
Accrued income taxes 8,554 222 266
Short-term debt 1,287 355 706
Current portion of finance and capital lease obligations 17,837 16,139 15,885
Current portion of non-recourse notes payable       214,535         182,915         169,399  
TOTAL CURRENT LIABILITIES 748,601 684,173 575,692
Finance and capital lease obligations, excluding current portion 320,791 337,452 341,424
Non-recourse notes payable, excluding current portion 6,755,534 5,672,175 5,211,064
Other liabilities       190,580         175,635         145,834  
TOTAL LIABILITIES       8,015,506         6,869,435         6,274,014  
Commitments and contingent liabilities
SHAREHOLDERS’ EQUITY:

Common stock, $0.50 par value; 350,000,000 shares authorized; 223,228,360 and 225,906,108 shares issued and outstanding as of November 30, 2013 and February 28, 2013, respectively

111,614 112,953 114,108
Capital in excess of par value 1,013,939 972,250 942,017
Accumulated other comprehensive loss (57,127 ) (59,808 ) (51,745 )
Retained earnings       2,219,943         1,993,772         2,019,289  
TOTAL SHAREHOLDERS’ EQUITY       3,288,369         3,019,167         3,023,669  
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY     $ 11,303,875       $ 9,888,602       $ 9,297,683  
 
 

CARMAX, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

     
Nine Months Ended November 30
(In thousands)     2013     2012  
OPERATING ACTIVITIES:
Net earnings $ 393,377

 

$

327,063

Adjustments to reconcile net earnings to net cash used in operating activities:

Depreciation and amortization 73,983 70,721
Share-based compensation expense 54,948 46,597
Provision for loan losses 48,993 40,154
Loss on disposition of assets 1,844 1,554
Deferred income tax benefit (4,576 ) (6,569 )
Net decrease (increase) in:
Accounts receivable, net 23,934 23,774
Inventory (38,464 ) (246,452 )
Other current assets 3,480 (7,336 )
Auto loan receivables, net (1,045,386 ) (632,342 )
Other assets (6,714 ) (506 )
Net increase (decrease) in:

Accounts payable, accrued expenses and other current liabilities and accrued income taxes

1,707 (102,666 )
Other liabilities       (266 )       (13,220 )
NET CASH USED IN OPERATING ACTIVITIES       (493,140 )       (499,228 )
INVESTING ACTIVITIES:
Capital expenditures (212,900 ) (184,942 )
Proceeds from sales of assets 5,143
Increase in restricted cash from collections on auto loan receivables (22,508 ) (46 )
Increase in restricted cash in reserve accounts (7,826 ) (6,912 )
Release of restricted cash from reserve accounts 15,022 15,980
Purchases of money market securities, net (3,833 ) (2,088 )
Purchases of investments available-for-sale (1,868 ) (1,525 )
Sales of investments available-for-sale       71         318  
NET CASH USED IN INVESTING ACTIVITIES       (228,699 )       (179,215 )
FINANCING ACTIVITIES:
Increase (decrease) in short-term debt, net 932 (237 )
Payments on finance and capital lease obligations (14,963 ) (10,365 )
Issuances of non-recourse notes payable 5,300,000 4,010,000
Payments on non-recourse notes payable (4,185,021 ) (3,313,626 )
Repurchase and retirement of common stock (196,748 ) (51,091 )
Equity issuances, net 19,967 29,486
Excess tax benefits from share-based payment arrangements       13,066         16,728  
NET CASH PROVIDED BY FINANCING ACTIVITIES       937,233         680,895  
Increase in cash and cash equivalents 215,394 2,452
Cash and cash equivalents at beginning of year       449,364         442,658  
CASH AND CASH EQUIVALENTS AT END OF PERIOD     $ 664,758    

 

$

445,110  
 




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