CarMax Reports Record Fourth Quarter and Fiscal Year Results

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CarMax Reports Record Fourth Quarter and Fiscal Year Results

RICHMOND, Va.--(BUSINESS WIRE)-- CarMax, Inc. (NYS: KMX) today reported record results for the fourth quarter and fiscal year ended February 28, 2013.

  • Net sales and operating revenues increased 14% to $2.83 billion in the fourth quarter. For the fiscal year, net sales and operating revenues increased 10% to $10.96 billion.
  • Used unit sales in comparable stores increased 6% in the fourth quarter and 5% in the fiscal year.
  • Total used unit sales rose 12% in the fourth quarter and 10% in the fiscal year.
  • Total wholesale unit sales increased 7% in the fourth quarter and 3% in the fiscal year.
  • CarMax Auto Finance (CAF) income increased 15% to $76.0 million in the fourth quarter. For the fiscal year, CAF income rose 14% to $299.3 million.
  • Net earnings grew 13% to $107.2 million in the fourth quarter. For the fiscal year, net earnings increased 5% to $434.3 million. The growth in net earnings per diluted share was similar to the net earnings growth, up 12% to $0.46 per share in the fourth quarter and up 4% to $1.87 per share for the fiscal year.

"We are pleased to report solid increases in used and wholesale vehicle unit sales and CAF income, which allowed us to achieve record earnings for both the fourth quarter and the fiscal year," said Tom Folliard, president and chief executive officer. "We believe our long-term focus on developing associates, enhancing the customer experience, driving efficiencies, and building our store base continues to drive great results."

Fourth Quarter Business Performance Review

Sales . Used vehicle sales growth remained strong, with total used units climbing 12% and comparable store used units up 6%, despite having one fewer day in this year's quarter. The comparable store used unit growth was driven by improved conversion, which we believe benefited from several factors, including more compelling credit offers from CAF, increased inventory selection and continued strong in-store execution.

For the fiscal year, our data indicates that we increased our share of the late-model (0- to 6-year old) used vehicle market by approximately 3%. The data indicates our share growth in the broader, 0- to 10-year old, used vehicle market was up approximately 6%, reflecting shifts in our inventory mix in recent years in response to changing customer needs.

Wholesale vehicle unit sales grew 7% compared with last year's quarter. Wholesale unit sales benefited from the growth in our store base, as well as modest increases in appraisal traffic and our appraisal buy rate.

Other sales and revenues declined 4% compared with the prior year's fourth quarter. Extended service plan (ESP) revenues increased 3%, as the effect of increases in used unit sales and ESP penetration was partially offset by an increase in our allowance for ESP returns. This adjustment reduced net earnings by $0.01 per share. Net third-party finance fees declined $5.2 million, due in part to a larger absolute number of financings sold at a discount. Third-party subprime providers (those who purchase financings at a discount) originated 15% of used vehicle unit sales in both the current year's and the prior year's fourth quarter.

Gross Profit . Total gross profit increased 9% to $369.2 million, primarily reflecting the increased used and wholesale vehicle unit sales. Used vehicle gross profit rose 12% to $253.3 million, driven by the 12% increase in used unit sales. Used vehicle gross profit per unit remained stable at $2,141 versus $2,135 in last year's fourth quarter. Wholesale vehicle gross profit increased 11% to $77.6 million, largely due to the 7% increase in wholesale unit sales. Wholesale vehicle gross profit per unit rose 4% to $985. Other gross profit fell 8% to $37.4 million, largely due to the reduction in net third party-finance fees and the increase in the ESP return allowance.

SG&A . Selling, general and administrative expenses increased 9% to $265.5 million. The increase reflected the combination of the 10% increase in our store base since the beginning of last year's fourth quarter (representing the addition of 11 stores), higher variable selling costs resulting from the 6% increase in comparable store used unit sales, and an increase in advertising expense. SG&A per retail unit declined to $2,212 versus $2,265 in the prior year's quarter.

CarMax Auto Finance .(1) CAF income increased 15% to $76.0 million primarily as a result of the 17% increase in average managed receivables, which grew to $5.74 billion. The increase in average managed receivables reflected the rise in CAF origination volumes throughout fiscal 2012 and fiscal 2013 resulting from an expansion of CAF's loan penetration rate, as well as our retail unit sales growth and higher average amounts financed.

The allowance for loan losses increased moderately to 1.0% of managed receivables as of February 28, 2013, compared with 0.9% as of February 29, 2012. Continued favorable loss experience partially offset the effect of the change in credit mix resulting from CAF's transition back to our pre-recession origination strategy beginning in fiscal 2012.

Superstore Openings . During the fourth quarter, we opened two stores, adding stores in the Denver, Colorado, and Jacksonville, Florida, markets. In total, we opened ten stores in fiscal 2013, bringing our used car superstore count to 118 as of February 28, 2013. Subsequent to the end of the year, we opened a small format store in Harrisonburg, Virginia.

Share Repurchase Program . During the fourth quarter of fiscal 2013, we repurchased 4.0 million shares of common stock for $151.7 million pursuant to our share repurchase program. For the fiscal year, we repurchased 5.8 million shares at a cost of $211.9 million.

(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

Sales Components

      
Three Months EndedYears Ended
As of February 28 or 29(1)As of February 28 or 29(1)
(In millions) 2013

 

2012

 Change 2013 2012 Change
Used vehicle sales$2,297.4$1,973.716.4%$8,747.0$7,826.911.8%
New vehicle sales45.245.8(1.5)%207.7200.63.6%
Wholesale vehicle sales427.1395.77.9%1,759.61,721.62.2%
Other sales and revenues:
Extended service plan revenues50.148.63.2%202.9179.613.0%
Service department sales25.424.05.8%101.898.63.2%
Third-party finance fees, net  (17.1)  (12.0) (43.3)%  (56.1)  (23.8) (136.0)%
Total other sales and revenues  58.4  60.6 (3.7)%  248.6  254.5 (2.3)%
Total net sales and operating revenues $2,827.9 $2,475.8 14.2% $10,962.8 $10,003.6 9.6%
 

(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 EndedYears Ended
February 28 or 29February 28 or 29
  2013

 

2012

 2013

 

2012

Used vehicle units6%4%5%1%
Used vehicle dollars10%7%7%7%
 

Total Used Vehicle Sales Changes

    
Three Months EndedYears Ended
February 28 or 29February 28 or 29
  2013

 

2012

 2013 2012
Used vehicle units12%6%10%3%
Used vehicle dollars16%10%12%9%
 

Unit Sales

    
Three Months EndedYears Ended
February 28 or 29February 28 or 29
  2013 2012 2013 2012
Used vehicles118,306105,769447,728408,080
New vehicles1,6911,7277,8557,679
Wholesale vehicles78,72073,897324,779316,649
 

Average Selling Prices

    
Three Months EndedYears Ended
February 28 or 29February 28 or 29
  2013 2012 2013 2012
Used vehicles$19,287$18,495$19,351$18,995
New vehicles$26,591$26,409$26,316$25,986
Wholesale vehicles$5,271$5,208$5,268$5,291
 

Selected Operating Ratios

        
Three Months EndedYears Ended
February 28 or 29February 28 or 29
(In millions) 2013 %(1) 2012 %(1) 2013 %(1) 2012 %(1)
Net sales and operating revenues$2,827.9100.0$2,475.8100.0$10,962.8100.0$10,003.6100.0
Gross profit$369.213.1$338.213.7$1,464.413.4$1,378.813.8
CarMax Auto Finance income$76.02.7$66.12.7$299.32.7$262.22.6
Selling, general, and administrative
expenses$265.59.4$243.59.8$1,031.09.4$940.89.4
Interest expense$8.00.3$8.40.3$32.40.3$33.70.3
Earnings before income taxes$172.26.1$152.86.2$701.46.4$666.96.7
Net earnings$107.23.8$95.03.8$434.34.0$413.84.1
 

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

Gross Profit

      
Three Months EndedYears Ended
February 28 or 29February 28 or 29
(In millions) 2013 2012 Change 2013 2012

 

Change

Used vehicle gross profit$253.3$225.812.2%$971.5$888.69.3%
New vehicle gross profit0.91.4(34.4)%5.06.5(23.8)%
Wholesale vehicle gross profit77.670.210.5%308.1301.82.1%
Other gross profit  37.4  40.8 (8.2)%  179.8  181.9 (1.2)%
Total $369.2 $338.2 9.2% $1,464.4 $1,378.8 6.2%
 

Gross Profit per Unit

        
Three Months EndedYears Ended
February 28 or 29February 28 or 29
  2013 2012 2013 2012
  $ per unit(1) %(2) $ per unit(1) %(2) $ per unit(1) %(2) $ per unit(1) %(2)
Used vehicle gross profit$2,14111.0$2,13511.4$2,17011.1$2,17711.4
New vehicle gross profit$5252.0$7843.0$ Read Full Story

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