Market Overview

CarMax Reports Third Quarter Results

Share:

CarMax, Inc. (NYSE:KMX) today reported results for the third quarter
ended November 30, 2017. Year-over-year highlights include:

  • Net sales and operating revenues increased 11.0% to $4.11 billion.
  • Used unit sales in comparable stores increased 2.7%.
  • Total used unit sales rose 8.2%.
  • Total wholesale unit sales increased 9.1%.
  • CarMax Auto Finance (CAF) income increased 15.1% to $102.8 million.
  • Net earnings increased 8.9% to $148.8 million and net earnings per
    diluted share rose 12.5% to $0.81.

Third Quarter Business Performance Review

Sales. Total used vehicle unit sales
grew 8.2% and comparable store used unit sales rose 2.7% versus the
prior year's third quarter. The comparable store sales performance
reflected an increase in conversion, partially offset by lower store
traffic. We were able to leverage our national footprint and nationwide
transportation network to quickly transfer vehicles into
hurricane-affected markets, and these stores drove our third quarter
comparable store unit sales growth.

Total wholesale vehicle unit sales increased 9.1% compared with the
third quarter of fiscal 2017, reflecting a substantial increase in our
appraisal buy rate and the growth in our store base. We believe the
appraisal buy rate benefited from strong wholesale industry vehicle
valuations.

Other sales and revenues increased 5.1% compared with the third quarter
of fiscal 2017, primarily reflecting improvements in extended protection
plan (EPP) revenues, partially offset by a decline in net third-party
finance fees. EPP revenues increased 9.8%, largely due to the growth in
our used unit sales. The $3.7 million reduction in third-party finance
fees reflected shifts in our sales mix by finance channel.

Gross Profit. Total gross profit
increased 7.2% versus last year's third quarter, to $539.2 million. Used
vehicle gross profit rose 7.9%, driven by the 8.2% increase in total
used unit sales. Used vehicle gross profit per unit was similar at
$2,148 versus $2,155 in the prior year period. Wholesale vehicle gross
profit increased 13.1% versus the prior year's quarter, driven by the
9.1% increase in wholesale unit sales and an increase in wholesale
vehicle gross profit per unit to $933 from $900. We believe this year's
third quarter wholesale gross profit per unit continued to benefit from
a favorable depreciation environment relative to historical trends.
Other gross profit declined 1.6%, reflecting a decrease in service
profits, together with the noted changes in EPP revenues and net
third-party finance fees.

SG&A. Compared with the third
quarter of fiscal 2017, SG&A expenses increased 12.0% to $399.7 million.
Factors contributing to the increase included: (i) the 13% increase in
our store base since the beginning of last year's third quarter
(representing the addition of 21 stores) and (ii) a combined increase of
$8.0 million in stock-based compensation expense and the accrual for
corporate incentive pay. SG&A per used unit was $2,356 in the current
quarter, up $81 year-over-year, of which $42 was due to the higher
stock-based compensation expense and corporate incentive pay accrual.

CarMax Auto Finance.(1)
Compared with last year's third quarter, CAF income increased 15.1% to
$102.8 million. The increase reflected the combined effects of the
growth in average managed receivables and a decline in the provision for
loan losses, partially offset by a lower total interest margin
percentage. Average managed receivables grew 10.4% to $11.37 billion.
The provision for loan losses declined 10.5% to $37.5 million, compared
with $41.9 million in the prior year quarter. The prior year's provision
was affected by rising loss experience, while losses in the current
year's quarter were generally consistent with expectations. The
allowance for loan losses as a percentage of ending managed receivables
was 1.11% as of November 30, 2017, compared with 1.15% as of August 31,
2017, and 1.10% as of November 30, 2016. The total interest margin,
which reflects the spread between interest and fees charged to consumers
and our funding costs, was 5.7% of average managed receivables compared
with 5.8% in last year's third quarter.

Interest Expense. Interest expense
rose to $17.4 million in the third quarter of fiscal 2018 from
$15.1 million in the prior year's third quarter. The increase primarily
reflected higher outstanding debt in fiscal 2018 and a reduction in
capitalized interest.

Income Taxes. The effective tax rate
declined to 33.9% in the third quarter of fiscal 2018 from 37.8% in the
prior year's third quarter. The current year's third quarter provision
for income taxes was reduced $8.7 million by the effect of a new
accounting standard for share-based compensation on stock option
settlement activity. The new accounting standard, which was adopted as
of the beginning of fiscal 2018, requires the income tax effects of
share-based awards be recognized in the provision for income taxes when
the awards vest or are settled; previously the tax effects were
recognized in shareholders' equity.

Store Openings. During the third
quarter of fiscal 2018, we opened five stores. We entered one new
television market (Tyler, Texas) and we added four stores in existing
television markets (Philadelphia, Pennsylvania; Las Vegas, Nevada; San
Francisco, California; and Seattle, Washington).

Share Repurchase Activity. During
the third quarter of fiscal 2018, we repurchased 1.5 million shares of
common stock for $107.2 million pursuant to our share repurchase
program. As of November 30, 2017, we had $1.14 billion remaining
available for repurchase under the current authorization.

 

(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 November 30 Nine Months Ended November 30
(In millions)   2017   2016   Change   2017   2016   Change
Used vehicle sales $ 3,425.5   $ 3,090.6   10.8 % $ 10,963.1   $ 9,820.4   11.6 %
Wholesale vehicle sales 552.8 488.4 13.2 % 1,653.9 1,616.5 2.3 %
Other sales and revenues:
Extended protection plan revenues 77.1 70.2 9.8 % 254.5 221.5 14.9 %
Third-party finance fees, net (12.8 ) (9.1 ) (40.7

)%

(35.8 ) (29.3 ) (22.3 )%
Other   64.4     61.4     5.0 %   200.3     196.0     2.2 %
Total other sales and revenues   128.7     122.5     5.1 %   419.0     388.2     7.9 %
Total net sales and operating revenues   $ 4,107.0     $ 3,701.5     11.0 %   $ 13,036.0     $ 11,825.2     10.2 %
 

Unit Sales

   
Three Months Ended November 30 Nine Months Ended November 30
    2017   2016   Change   2017   2016   Change
Used vehicles 169,648   156,789   8.2

%

550,940   495,277   11.2 %
Wholesale vehicles 100,332 91,973 9.1 % 309,283 300,543 2.9 %
 

Average Selling Prices

   
Three Months Ended November 30 Nine Months Ended November 30
    2017   2016   Change   2017   2016   Change
Used vehicles $ 20,008   $ 19,520   2.5 % $ 19,705   $ 19,640   0.3 %
Wholesale vehicles $ 5,268 $ 5,103 3.2 % $ 5,110 $ 5,165 (1.1 )%
 

Vehicle Sales Changes

   

Three Months Ended
November 30

Nine Months Ended
November 30

    2017   2016   2017   2016
Used vehicle units 8.2 %   9.1 % 11.2 %   6.6 %
Used vehicle revenues 10.8 % 6.2 % 11.6 % 5.0 %
 
Wholesale vehicle units 9.1 % (2.2 )% 2.9 % (0.6 )%
Wholesale vehicle revenues 13.2 % (4.9 )% 2.3 % (3.9 )%
 

Comparable Store Used Vehicle Sales Changes
(1)

   

Three Months Ended
November 30

Nine Months Ended
November 30
    2017   2016   2017   2016
Used vehicle units 2.7 %   5.4 % 5.5 %   2.8 %
Used vehicle revenues 5.3 % 2.5 % 5.8 % 1.2 %
 

(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
November 30

Nine Months Ended
November 30

          2017   2016   2017   2016
CAF (2) 49.2 %   50.1 % 48.5 %   49.9 %
Tier 2 (3) 15.4 % 17.0 % 16.9 % 17.7 %
Tier 3 (4) 10.8 % 9.7 % 10.1 % 9.9 %
Other (5)         24.6 %   23.2 %   24.5 %   22.5 %
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 November 30 Nine Months Ended November 30
(In millions)   2017   % (1)   2016   % (1)   2017   % (1)   2016   % (1)
Net sales and operating revenues $ 4,107.0   100.0   $ 3,701.5   100.0 $ 13,036.0   100.0   $ 11,825.2   100.0
Gross profit $ 539.2 13.1 $ 503.1 13.6 $ 1,792.1 13.7 $ 1,621.1 13.7
CarMax Auto Finance income $ 102.8 2.5 $ 89.4 2.4 $ 320.1 2.5 $ 286.1 2.4
Selling, general, and administrative expenses $ 399.7 9.7 $ 356.7 9.6 $ 1,208.2 9.3 $ 1,103.1 9.3
Interest expense $ 17.4 0.4 $ 15.1 0.4 $ 51.1 0.4 $ 40.1 0.3
Earnings before income taxes $ 225.2 5.5 $ 219.7 5.9 $ 853.5 6.5 $ 764.1 6.5
Net earnings $ 148.8 3.6 $ 136.6 3.7 $ 542.0 4.2 $ 474.4 4.0
 

(1)

Calculated as a percentage of net sales and operating
revenues.

 

Gross Profit

   
Three Months Ended November 30 Nine Months Ended November 30
(In millions)   2017   2016   Change   2017   2016   Change
Used vehicle gross profit $ 364.3   $ 337.8   7.9 % $ 1,201.4   $ 1,076.1   11.6 %
Wholesale vehicle gross profit 93.6 82.8 13.1 % 298.5 277.1 7.7 %
Other gross profit   81.3     82.5     (1.6 )%   292.2     267.9     9.1 %
Total   $ 539.2     $ 503.1     7.2 %   $ 1,792.1     $ 1,621.1     10.5 %
 

Gross Profit per Unit

   
Three Months Ended November 30 Nine Months Ended November 30
    2017   2016   2017   2016
    $ per unit(1)   %(2)   $ per unit(1)   %(2)   $ per unit(1)   %(2)   $ per unit(1)   %(2)
Used vehicle gross profit $ 2,148   10.6   $ 2,155   10.9 $ 2,181   11.0   $ 2,173   11.0
Wholesale vehicle gross profit $ 933 16.9 $ 900 16.9 $ 965 18.1 $ 922 17.1
Other gross profit $ 479 63.1 $ 527 67.4 $ 530 69.7 $ 541 69.0
Total gross profit $ 3,178 13.1 $ 3,209 13.6 $ 3,253 13.7 $ 3,273 13.7
 

(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 November 30 Nine Months Ended November 30
(In millions)   2017   2016   Change   2017   2016   Change
Compensation and benefits (1) $ 209.8   $ 182.2   15.1 % $ 650.4   $ 598.1   8.7 %
Store occupancy costs 86.0 75.8 13.4 % 250.9 222.6 12.7 %
Advertising expense 36.5 34.8 4.9 % 114.3 104.1 9.8 %
Other overhead costs (2)   67.4     63.9     5.4 %   192.6     178.3     8.0 %
Total SG&A expenses   $ 399.7     $ 356.7     12.0 %   $ 1,208.2     $ 1,103.1     9.5 %
SG&A per used unit $ 2,356 $ 2,275 $ 81 $ 2,193 $ 2,227 $ (34 )
 

(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, travel, non-CAF bad debt, 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)   2017   % (1)   2016   % (1)   2017   % (1)   2016   % (1)
Interest margin:            
Interest and fee income $ 217.1 7.6 $ 192.7 7.5 $ 637.4 7.7 $ 567.0 7.5
Interest expense   (55.4 )   (2.0 )   (44.1 )   (1.7 )   (156.6 )   (1.9 )   (125.3 )   (1.7 )
Total interest margin 161.7 5.7 148.6 5.8 480.8 5.8 441.7 5.9
Provision for loan losses   (37.5 )   (1.3 )   (41.9 )   (1.6 )   (99.0 )   (1.2 )   (104.2 )   (1.4 )

Total interest margin after provision for loan losses

124.2 4.4 106.7 4.1 381.8 4.6 337.5 4.5
 
Total direct expenses   (21.4 )   (0.8 )   (17.3 )   (0.7 )   (61.7 )   (0.7 )   (51.4 )   (0.7 )
CarMax Auto Finance income   $ 102.8     3.6     $ 89.4     3.5     $ 320.1     3.9     $ 286.1     3.8  
 
Total average managed receivables $ 11,365.6 $ 10,297.8 $ 11,102.4 $ 10,030.9
Net loans originated $ 1,454.5 $ 1,339.1 $ 4,542.8 $ 4,217.7
Net penetration rate 44.2 % 45.0 % 43.1 % 44.7 %
Weighted average contract rate 7.7 % 7.3 % 7.7 % 7.4 %
 
Ending allowance for loan losses $ 127.7 $ 114.8 $ 127.7 $ 114.8
 
Warehouse facility information:
Ending funded receivables $ 1,882.0 $ 1,677.0 $ 1,882.0 $ 1,677.0
Ending unused capacity $ 1,058.0 $ 1,123.0 $ 1,058.0 $ 1,123.0
 

(1)

Annualized percentage of total average managed receivables.

 

Earnings Highlights

   
Three Months Ended November 30 Nine Months Ended November 30
(In millions except per share data)   2017   2016   Change   2017   2016   Change
Net earnings $ 148.8   $ 136.6   8.9 % $ 542.0   $ 474.4   14.3 %
Diluted weighted average shares outstanding 184.0 190.8 (3.6 )% 185.2 193.2 (4.2 )%
Net earnings per diluted share $ 0.81 $ 0.72 12.5 % $ 2.93 $ 2.45 19.6 %
 

Planned Store Openings

We currently plan to open the following stores within 12 months from
November 30, 2017. During this period, we will be entering eight new
television markets and expanding our presence in seven existing
television markets. Of the 15 stores we plan to open during the 12
months ending November 30, 2018, 12 will be in Metropolitan Statistical
Areas having populations of 600,000 or less, which we define as small
markets.

     
Location   Television Market  

Metropolitan
Statistical Area

 

Planned
Opening Date

Myrtle Beach, South Carolina (1) Myrtle Beach/Florence (2) Myrtle Beach Q4 Fiscal 2018
South Portland, Maine Portland/Auburn (2) Portland Q4 Fiscal 2018
Manchester, New Hampshire Boston Manchester Q4 Fiscal 2018
Golden, Colorado Denver Denver/Aurora Q4 Fiscal 2018
Winterville, North Carolina Greenville/New Bern/Washington (2) Greenville Q1 Fiscal 2019
McKinney, Texas Dallas/Ft. Worth Dallas/Ft. Worth Q1 Fiscal 2019
Jensen Beach, Florida Miami/Ft. Lauderdale/W. Palm Beach Port St. Lucie Q1 Fiscal 2019
Santa Fe, New Mexico Albuquerque/Santa Fe Santa Fe Q2 Fiscal 2019
Warner Robins, Georgia Macon (2) Warner Robins Q2 Fiscal 2019
Norman, Oklahoma Oklahoma City Oklahoma City Q2 Fiscal 2019
Wilmington, North Carolina Wilmington (2) Wilmington Q3 Fiscal 2019
Lafayette, Louisiana Lafayette (2) Lafayette Q3 Fiscal 2019
Corpus Christi, Texas Corpus Christi (2) Corpus Christi Q3 Fiscal 2019
Shreveport, Louisiana Shreveport (2) Shreveport Q3 Fiscal 2019
Melbourne, Florida Orlando/Daytona Beach Palm Bay/Melbourne Q3 Fiscal 2019
 

(1)

Store opened in December 2017.

(2)

Represents new television market as of planned store opening
date.

 

Normal construction, permitting or other scheduling delays could shift
the opening dates of any of these stores into a later period.

Conference Call Information

We will host a conference call for investors at 9:00 a.m. ET today,
December 21, 2017. 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 73777146.
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 April 3, 2018. A telephone replay also will be available through
December 29, 2017, 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 73777146.

Fourth Quarter Fiscal 2018 Earnings Release Date

We currently plan to release results for the fourth quarter ending
February 28, 2018, on Wednesday, April 4, 2018, 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 March 2018.

About CarMax

CarMax is the nation's largest retailer of used cars, currently
operating 185 stores in 39 states nationwide. CarMax revolutionized the
auto industry by delivering the honest, transparent and high-integrity
car buying experience customers want and deserve. For more than 20
years, CarMax has made car buying more ethical, fair and stress-free by
offering a no-haggle, no-hassle experience and an incredible selection
of vehicles. CarMax makes selling your car easy too, by offering
no-obligation appraisals good for seven days. At CarMax, we'll buy your
car even if you don't buy ours®. CarMax has more than 24,000
associates nationwide and for 13 consecutive years has
been named as one of the Fortune 100 Best Companies to
Work For®. During the twelve months ended February 28, 2017,
the company retailed 671,294 used vehicles and sold 391,686 wholesale
vehicles at its 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, expenses, capital expenditures, debt
obligations 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:

  • Changes in the competitive landscape and/or our failure to
    successfully adjust to such changes.
  • Events that damage our reputation or harm the perception of the
    quality of our brand.
  • Changes in general or regional U.S. economic conditions.
  • Changes in tax law, including the effect of federal tax reform.
  • Changes in the availability or cost of capital and working capital
    financing, including changes related to the asset-backed
    securitization market.
  • Our inability to recruit, develop and retain associates and maintain
    positive associate relations.
  • The loss of key associates from our store, regional or corporate
    management teams or a significant increase in labor costs.
  • Security breaches or other events that result in the misappropriation,
    loss or other unauthorized disclosure of confidential customer,
    associate or corporate information.
  • Significant changes in prices of new and used vehicles.
  • Changes in economic conditions or other factors that result in greater
    credit losses for CAF's portfolio of auto loan receivables than
    anticipated.
  • A reduction in the availability of or access to sources of inventory
    or a failure to expeditiously liquidate inventory.
  • Changes in consumer credit availability provided by our third-party
    finance providers.
  • Changes in the availability of extended protection plan products from
    third-party providers.
  • Factors related to the regulatory and legislative environment in which
    we operate.
  • Factors related to geographic and sales growth, including the
    inability to effectively manage our growth.
  • The failure of or inability to sufficiently enhance key information
    systems.
  • The effect of various litigation matters.
  • Adverse conditions affecting one or more automotive manufacturers, and
    manufacturer recalls.
  • The inaccuracy of estimates and assumptions used in the preparation of
    our financial statements, or the effect of new accounting requirements
    or changes to U.S. generally accepted accounting principles.
  • The performance of the third-party vendors we rely on for key
    components of our business.
  • Factors related to seasonal fluctuations in our business.
  • The occurrence of severe weather events.
  • Factors related to the geographic concentration of our stores.

For more details on factors that could affect expectations, see our
Annual Report on Form 10-K for the fiscal year ended February 28, 2017,
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 1-804-747-0422 ext. 4391. 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 November 30 Nine Months Ended November 30
(In thousands except per share data)   2017   % (1)   2016   % (1)   2017   % (1)   2016   % (1)
SALES AND OPERATING REVENUES:            
Used vehicle sales $ 3,425,540 83.4 $ 3,090,613 83.5 $ 10,963,113 84.1 $ 9,820,401 83.0
Wholesale vehicle sales 552,754 13.5 488,385 13.2 1,653,911 12.7 1,616,528 13.7
Other sales and revenues   128,723     3.1     122,526     3.3     418,967     3.2     388,229     3.3
NET SALES AND OPERATING REVENUES 4,107,017 100.0 3,701,524 100.0 13,035,991 100.0 11,825,158 100.0
Cost of sales   3,567,829     86.9     3,198,389     86.4     11,243,860     86.3     10,204,024     86.3
GROSS PROFIT 539,188 13.1 503,135 13.6 1,792,131 13.7 1,621,134 13.7
CARMAX AUTO FINANCE INCOME 102,810 2.5 89,359 2.4 320,109 2.5 286,086 2.4
Selling, general and administrative expenses 399,672 9.7 356,735 9.6 1,208,237 9.3 1,103,091 9.3
Interest expense 17,405 0.4 15,071 0.4 51,079 0.4 40,063 0.3
Other (income) expense   (279 )       1,027         (561 )       (24 )  
Earnings before income taxes 225,200 5.5 219,661 5.9 853,485 6.5 764,090 6.5
Income tax provision   76,360     1.9     83,016     2.2     311,519     2.4     289,723     2.5
NET EARNINGS   $ 148,840     3.6     $ 136,645     3.7     $ 541,966     4.2     $ 474,367     4.0
WEIGHTED AVERAGE COMMON SHARES:
Basic 181,888 189,200 183,324 191,431
Diluted 184,033 190,818 185,201 193,239
NET EARNINGS PER SHARE:
Basic $ 0.82 $ 0.72 $ 2.96 $ 2.48
Diluted $ 0.81 $ 0.72 $ 2.93 $ 2.45
 

(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
November 30   February 28   November 30
(In thousands except share data)   2017   2017   2016
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 26,287 $ 38,416 $ 23,713
Restricted cash from collections on auto loan receivables 388,945 380,353 357,040
Accounts receivable, net 95,841 152,388 92,003
Inventory 2,440,551 2,260,563 2,170,175
Other current assets   53,299     41,910     41,347  
TOTAL CURRENT ASSETS 3,004,923 2,873,630 2,684,278
Auto loan receivables, net 11,376,825 10,596,076 10,333,318
Property and equipment, net 2,634,442 2,518,393 2,449,343
Deferred income taxes 133,173 150,962 155,995
Other assets   154,051     140,295     137,133  
TOTAL ASSETS   $ 17,303,414     $ 16,279,356     $ 15,760,067  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 519,984 $ 494,989 $ 476,757
Accrued expenses and other current liabilities 233,397 266,128 224,585
Accrued income taxes 1,404 2,071
Short-term debt 593 62 880
Current portion of finance and capital lease obligations 9,590 9,491 10,566
Current portion of non-recourse notes payable   348,114     333,713     312,858  
TOTAL CURRENT LIABILITIES 1,111,678 1,105,787 1,027,717
Long-term debt, excluding current portion 1,042,874 952,562 888,161
Finance and capital lease obligations, excluding current portion 490,968 486,645 466,965
Non-recourse notes payable, excluding current portion 11,117,495 10,387,231 10,129,401
Other liabilities   239,672     238,551     232,439  
TOTAL LIABILITIES   14,002,687     13,170,776     12,744,683  
 
Commitments and contingent liabilities
SHAREHOLDERS' EQUITY:
Common stock, $0.50 par value; 350,000,000 shares authorized;
181,489,439 and 186,548,602 shares issued and outstanding as of
November 30, 2017 and February 28, 2017, respectively
90,745 93,274 93,676
Capital in excess of par value 1,233,062 1,188,578 1,160,484
Accumulated other comprehensive loss (51,304 ) (56,555 ) (60,135 )
Retained earnings   2,028,224     1,883,283     1,821,359  
TOTAL SHAREHOLDERS' EQUITY   3,300,727     3,108,580     3,015,384  
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $ 17,303,414     $ 16,279,356     $ 15,760,067  

 

CARMAX, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 
Nine Months Ended November 30
(In thousands)   2017   2016 (1)
OPERATING ACTIVITIES:  
Net earnings $ 541,966 $ 474,367
Adjustments to reconcile net earnings to net cash used in operating
activities:
Depreciation and amortization 133,175 125,654
Share-based compensation expense 52,363 72,026
Provision for loan losses 98,982 104,249
Provision for cancellation reserves 50,850 51,768
Deferred income tax provision (benefit) 14,384 (584 )
Other 1,223 2,118
Net decrease (increase) in:
Accounts receivable, net 56,547 40,168
Inventory (179,988 ) (238,146 )
Other current assets (5,422 ) (5,802 )
Auto loan receivables, net (879,731 ) (900,675 )
Other assets (348 ) 1,193
Net (decrease) increase in:

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

(9,373 ) 1,840
Other liabilities   (67,750 )   (64,222 )
NET CASH USED IN OPERATING ACTIVITIES   (193,122 )   (336,046 )
INVESTING ACTIVITIES:
Capital expenditures (227,559 ) (315,543 )
Proceeds from disposal of property and equipment 96 728
Increase in restricted cash from collections on auto loan receivables (8,592 ) (13,211 )
Increase in restricted cash in reserve accounts (16,799 ) (11,663 )
Release of restricted cash from reserve accounts 13,411 8,083
Purchases of investments (8,525 ) (6,924 )
Sales of investments   466     318  
NET CASH USED IN INVESTING ACTIVITIES   (247,502 )   (338,212 )
FINANCING ACTIVITIES:
Increase in short-term debt, net 531 452
Proceeds from issuances of long-term debt 2,996,700 1,660,600
Payments on long-term debt (2,906,700 ) (1,484,900 )
Cash paid for debt issuance costs (11,524 ) (12,568 )
Payments on finance and capital lease obligations (6,704 ) (8,407 )
Issuances of non-recourse notes payable 7,720,963 7,235,000
Payments on non-recourse notes payable (6,976,360 ) (6,299,802 )
Repurchase and retirement of common stock (454,960 ) (464,352 )
Equity issuances   66,549     34,554  
NET CASH PROVIDED BY FINANCING ACTIVITIES   428,495     660,577  
Decrease in cash and cash equivalents (12,129 ) (13,681 )
Cash and cash equivalents at beginning of year   38,416     37,394  
CASH AND CASH EQUIVALENTS AT END OF PERIOD   $ 26,287     $ 23,713  
 

(1)

In connection with our adoption of Financial Accounting
Standards Board ("FASB") ASU 2016-09 during the first quarter of
fiscal 2018, cash flows related to excess tax benefits from
share-based payment arrangements are now classified as operating
activities rather than financing activities. Prior period amounts
have been reclassified to conform to the current period's
presentation.

View Comments and Join the Discussion!