RICHMOND, Va.--(BUSINESS WIRE)--CarMax, Inc. (NYSE:KMX), the nation’s largest retailer of used cars, today reported results for the third quarter ended November 30, 2019.
Highlights:
- Net sales and operating revenues increased 11.5% to $4.79 billion.
- Used unit sales in comparable stores increased 7.5%.
- Total used unit sales rose 11.0%.
- Total wholesale unit sales increased 3.3%.
- CarMax Auto Finance (CAF) income increased 3.9% to $114.0 million.
- Net earnings declined 9.0% to $173.2 million and net earnings per diluted share declined 4.6% to $1.04.
- Omni-channel experience remains on track to be available to the majority of customers by the end of fiscal 2020, and we plan to complete the roll out in fiscal 2021.
CEO Commentary:
“We are pleased with our strong unit sales growth this quarter,” said Bill Nash, president and chief executive officer. “Our retail sales strength was a direct result of our ability to execute well, with solid performance in operations, financing, customer progression, and marketing all contributing to our growth. In addition, we benefited from a favorable underlying used car sales environment.”
Commenting on net earnings and net earnings per diluted share for the third quarter, Nash noted that the year-over-year decrease was largely the result of a significantly higher stock-based compensation expense reflecting an increasing share price during the quarter and a planned increase in third quarter advertising expense related to the company’s omni-channel rollout and the launch of a new national advertising campaign.
“We remain excited about the unique and powerful experience we are providing through omni-channel, which is empowering customers to shop on their terms, whenever and wherever it is most convenient for them,” added Nash. “Our ability to seamlessly integrate our physical and digital experiences while continuing to drive comparable store sales growth, maintain an attractive used vehicle gross profit per unit, and deliver our exceptional customer service is a key differentiator.”
Third Quarter Business Performance Review:
Sales. Total used vehicle unit sales increased 11.0%, including a 7.5% increase in comparable store used unit sales compared with the prior year’s third quarter. The comparable store sales performance reflected strong conversion, which was aided by continued support from our third-party lending partners; solid growth in web traffic; and a favorable consumer response to our consumer initiatives.
Total wholesale vehicle unit sales increased 3.3% compared with the third quarter of fiscal 2019, driven by the growth in our store base, partially offset by lower appraisal traffic.
Other sales and revenues increased 4.1% compared with the third quarter of fiscal 2019. Extended protection plan (EPP) net revenues rose $11.4 million, largely reflecting our strong used unit growth and increased margins.
Gross Profit. Total gross profit increased 7.8% versus last year’s third quarter to $613.6 million. Used vehicle gross profit rose 11.7%, reflecting the increase in total used unit sales and a modest improvement in used vehicle gross profit per unit to $2,145 compared with $2,133 in the prior year’s quarter. Wholesale vehicle gross profit increased 2.0% versus the prior year’s quarter, driven by the increase in wholesale unit sales, partially offset by a decrease in wholesale vehicle gross profit per unit to $937 compared with $949 in last year’s third quarter. Other gross profit declined 0.8%, as the growth in EPP profits was offset by an $11.0 million decline in service department profits. The current quarter’s service profits were adversely affected by a recent increase in our post-sale warranty period from 30 to 90 days, near-term inefficiencies resulting from our recent ramp in technician hiring to support future sales growth, and higher stock-based compensation expense for service operations associates.
SG&A. Compared with the third quarter of fiscal 2019, SG&A expenses increased 18.4% to $484.8 million. Stock-based compensation expense rose $19.0 million, representing roughly one-quarter of the total year-over-year increase in SG&A expense. Other factors contributing to the change included a planned increase in advertising expense, the 10% increase in our store base since the beginning of last year’s third quarter (representing the addition of 19 stores), higher variable costs associated with our strong retail sales growth, and continued spending to advance our technology platforms and support our core and omni-channel strategic initiatives.
The growth in stock-based compensation expense was primarily driven by the 17% increase in our stock price during the current quarter versus the 15% decrease during the prior year quarter. Advertising expense increased $14.5 million due to both our new national advertising campaign launched in October and incremental marketing to support our omni-channel roll out. For the full year, we expect our fiscal 2020 advertising expense per retail unit to be slightly higher than the fiscal 2019 level. SG&A per used unit was $2,518 in the current quarter, up $157 year-over-year. The growth in stock-based compensation expense increased SG&A per used unit by $94.
CarMax Auto Finance.(1) Compared with last year’s third quarter, CAF income increased 3.9% to $114.0 million, reflecting a 7.5% increase in average managed receivables and a modest improvement in the total interest margin percentage, slightly offset by a higher loan loss provision. The provision for loan losses increased to $49.0 million from $40.8 million in the prior year quarter, reflecting both the growth in average managed receivables and a small increase in the provision as a percentage of managed receivables. Net losses remained well within our long-term targeted performance range. The allowance for loan losses was 1.15% of ending managed receivables as of November 30, 2019, comparable with 1.15% as of August 31, 2019, and up versus 1.12% as of November 30, 2018. The total interest margin percentage, which represents the spread between interest and fees charged to consumers and our funding costs, improved to 5.7% of average managed receivables from 5.6% in the prior year’s third quarter.
Other Income / Expense. We reported other income of $6.6 million in the third quarter of fiscal 2020 compared with other expense of $2.8 million in the prior year’s third quarter. The increase was primarily due to an unrealized gain on an investment recorded in the current year period.
Share Repurchase Activity. We repurchased 1.3 million shares of common stock for $114.8 million pursuant to our share repurchase program during the third quarter of fiscal 2020. As of November 30, 2019, we had $1.67 billion remaining available for repurchase under the outstanding 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) |
2019 |
|
2018 |
|
Change |
|
2019 |
|
2018 |
|
Change |
|||||||||||
Used vehicle sales |
$ |
4,028.8 |
|
|
$ |
3,547.9 |
|
|
13.6 |
% |
|
$ |
12,915.8 |
|
|
$ |
11,544.3 |
|
|
11.9 |
% |
|
Wholesale vehicle sales |
611.0 |
|
|
603.6 |
|
|
1.2 |
% |
|
1,951.7 |
|
|
1,849.2 |
|
|
5.5 |
% |
|||||
Other sales and revenues: |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Extended protection plan revenues |
97.0 |
|
|
85.6 |
|
|
13.3 |
% |
|
321.7 |
|
|
284.2 |
|
|
13.2 |
% |
|||||
Third-party finance fees, net |
(9.4 |
) |
|
(8.4 |
) |
|
(12.2 |
)% |
|
(35.2 |
) |
|
(32.5 |
) |
|
(8.2 |
)% |
|||||
Other |
62.6 |
|
|
67.2 |
|
|
(6.7 |
)% |
|
203.5 |
|
|
209.2 |
|
|
(2.7 |
)% |
|||||
Total other sales and revenues |
150.2 |
|
|
144.4 |
|
|
4.1 |
% |
|
490.0 |
|
|
460.9 |
|
|
6.3 |
% |
|||||
Total net sales and operating revenues |
$ |
4,790.0 |
|
|
$ |
4,295.9 |
|
|
11.5 |
% |
|
$ |
15,357.5 |
|
|
$ |
13,854.5 |
|
|
10.8 |
% |
|
Unit Sales
|
Three Months Ended November 30 |
|
Nine Months Ended November 30 |
|||||||||||
|
2019 |
|
2018 |
|
Change |
|
2019 |
|
2018 |
|
Change |
|||
Used vehicles |
192,563 |
|
173,476 |
|
11.0 |
% |
|
625,922 |
|
568,754 |
|
10.1 |
% |
|
Wholesale vehicles |
113,996 |
|
110,403 |
|
3.3 |
% |
|
361,277 |
|
344,604 |
|
4.8 |
% |
|
Average Selling Prices
|
||||||||||||||||||||||
|
Three Months Ended November 30 |
|
Nine Months Ended November 30 |
|||||||||||||||||||
|
2019 |
|
2018 |
|
Change |
|
2019 |
|
2018 |
|
Change |
|||||||||||
Used vehicles |
$ |
20,710 |
|
|
$ |
20,273 |
|
|
2.2 |
% |
|
$ |
20,431 |
|
|
$ |
20,109 |
|
|
1.6 |
% |
|
Wholesale vehicles |
$ |
5,079 |
|
|
$ |
5,214 |
|
|
(2.6 |
)% |
|
$ |
5,128 |
|
|
$ |
5,120 |
|
|
0.2 |
% |
|
Vehicle Sales Changes
|
Three Months Ended November 30 |
|
Nine Months Ended November 30 |
|||||||||
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|||||
Used vehicle units |
11.0 |
% |
2.3 |
% |
|
10.1 |
% |
3.2 |
% |
|||
Used vehicle revenues |
13.6 |
% |
3.6 |
% |
|
11.9 |
% |
5.3 |
% |
|||
|
|
|
|
|
|
|||||||
Wholesale vehicle units |
3.3 |
% |
10.0 |
% |
|
4.8 |
% |
11.4 |
% |
|||
Wholesale vehicle revenues |
1.2 |
% |
9.2 |
% |
|
5.5 |
% |
11.8 |
% |
|||
Comparable Store Used Vehicle Sales Changes (1)
|
||||||||||||
|
Three Months Ended November 30 |
|
Nine Months Ended November 30 |
|||||||||
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|||||
Used vehicle units |
7.5 |
% |
(1.2 |
)% |
|
6.7 |
% |
(0.5 |
)% |
|||
Used vehicle revenues |
10.0 |
% |
0.1 |
% |
|
8.5 |
% |
1.5 |
% |
|||
(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 |
|||||||||
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|||||
CAF (2) |
47.2 |
% |
|
49.1 |
% |
|
46.7 |
% |
|
48.9 |
% |
|
Tier 2 (3) |
20.4 |
% |
|
18.3 |
% |
|
20.1 |
% |
|
17.4 |
% |
|
Tier 3 (4) |
9.5 |
% |
|
9.3 |
% |
|
10.3 |
% |
|
9.7 |
% |
|
Other (5) |
22.9 |
% |
|
23.3 |
% |
|
22.9 |
% |
|
24.0 |
% |
|
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) |
2019 |
|
% (1) |
|
2018 |
|
% (1) |
|
2019 |
|
% (1) |
|
2018 |
|
% (1) |
|||||||||||||
Net sales and operating revenues |
$ |
4,790.0 |
|
100.0 |
|
|
$ |
4,295.9 |
|
100.0 |
|
|
$ |
15,357.5 |
|
100.0 |
|
|
$ |
13,854.5 |
|
100.0 |
|
|||||
Gross profit |
$ |
613.6 |
|
12.8 |
|
|
$ |
569.2 |
|
13.3 |
|
|
$ |
2,049.5 |
|
13.3 |
|
|
$ |
1,881.2 |
|
13.6 |
|
|||||
CarMax Auto Finance income |
$ |
114.0 |
|
2.4 |
|
|
$ |
109.7 |
|
2.6 |
|
|
$ |
344.1 |
|
2.2 |
|
|
$ |
335.0 |
|
2.4 |
|
|||||
Selling, general, and administrative expenses |
$ |
484.8 |
|
10.1 |
|
|
$ |
409.5 |
|
9.5 |
|
|
$ |
1,455.3 |
|
9.5 |
|
|
$ |
1,301.3 |
|
9.4 |
|
|||||
Interest expense |
$ |
21.8 |
|
0.5 |
|
|
$ |
18.8 |
|
0.4 |
|
|
$ |
60.7 |
|
0.4 |
|
|
$ |
54.8 |
|
0.4 |
|
|||||
Earnings before income taxes |
$ |
227.6 |
|
4.8 |
|
|
$ |
247.8 |
|
5.8 |
|
|
$ |
884.4 |
|
5.8 |
|
|
$ |
857.0 |
|
6.2 |
|
|||||
Net earnings |
$ |
173.2 |
|
3.6 |
|
|
$ |
190.3 |
|
4.4 |
|
|
$ |
673.5 |
|
4.4 |
|
|
$ |
649.9 |
|
4.7 |
|
|||||
(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) |
2019 |
|
2018 |
|
Change |
|
2019 |
|
2018 |
|
Change |
|||||||||||
Used vehicle gross profit |
$ |
413.1 |
|
|
$ |
370.0 |
|
|
11.7 |
% |
|
$ |
1,366.3 |
|
|
$ |
1,238.4 |
|
|
10.3 |
% |
|
Wholesale vehicle gross profit |
106.8 |
|
|
104.7 |
|
|
2.0 |
% |
|
350.1 |
|
|
330.5 |
|
|
5.9 |
% |
|||||
Other gross profit |
93.7 |
|
|
94.5 |
|
|
(0.8 |
)% |
|
333.1 |
|
|
312.3 |
|
|
6.6 |
% |
|||||
Total |
$ |
613.6 |
|
|
$ |
569.2 |
|
|
7.8 |
% |
|
$ |
2,049.5 |
|
|
$ |
1,881.2 |
|
|
8.9 |
% |
|
Gross Profit per Unit
|
Three Months Ended November 30 |
|
Nine Months Ended November 30 |
|||||||||||||||||||||||||
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|||||||||||||||||||||
|
$ per unit(1) |
|
%(2) |
|
$ per unit(1) |
|
%(2) |
|
$ per unit(1) |
|
%(2) |
|
$ per unit(1) |
|
%(2) |
|||||||||||||
Used vehicle gross profit |
$ |
2,145 |
|
10.3 |
|
$ |
2,133 |
|
10.4 |
|
|
$ |
2,183 |
|
10.6 |
|
$ |
2,177 |
|
10.7 |
|
|||||||
Wholesale vehicle gross profit |
$ |
937 |
|
17.5 |
|
$ |
949 |
|
17.4 |
|
|
$ |
969 |
|
17.9 |
|
$ |
959 |
|
17.9 |
|
|||||||
Other gross profit |
$ |
487 |
|
62.4 |
|
$ |
545 |
|
65.5 |
|
|
$ |
532 |
|
68.0 |
|
$ |
549 |
|
67.8 |
|
|||||||
Total gross profit |
$ |
3,187 |
|
12.8 |
|
$ |
3,281 |
|
13.3 |
|
|
$ |
3,274 |
|
13.3 |
|
$ |
3,308 |
|
13.6 |
|
|||||||
(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) |
2019 |
|
2018 |
|
Change |
|
2019 |
|
2018 |
|
Change |
|||||||||||||
Compensation and benefits: |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Compensation and benefits, excluding share-based compensation expense |
$ |
217.2 |
|
|
$ |
197.2 |
|
|
10.1 |
% |
|
$ |
674.7 |
|
|
$ |
627.8 |
|
|
7.5 |
% |
|||
Share-based compensation expense |
26.3 |
|
|
7.3 |
|
|
260.3 |
% |
|
89.0 |
|
|
57.0 |
|
|
56.1 |
% |
|||||||
Total compensation and benefits (1) |
$ |
243.5 |
|
|
$ |
204.5 |
|
|
19.1 |
% |
|
$ |
763.7 |
|
|
$ |
684.8 |
|
|
11.5 |
% |
|||
Store occupancy costs |
98.0 |
|
|
90.3 |
|
|
8.5 |
% |
|
291.2 |
|
|
268.9 |
|
|
8.3 |
% |
|||||||
Advertising expense |
51.8 |
|
|
37.4 |
|
|
38.8 |
% |
|
140.6 |
|
|
122.5 |
|
|
14.7 |
% |
|||||||
Other overhead costs (2) |
91.5 |
|
|
77.3 |
|
|
18.3 |
% |
|
259.8 |
|
|
225.1 |
|
|
15.4 |
% |
|||||||
Total SG&A expenses |
$ |
484.8 |
|
|
$ |
409.5 |
|
|
18.4 |
% |
|
$ |
1,455.3 |
|
|
$ |
1,301.3 |
|
|
11.8 |
% |
|||
SG&A per used unit |
$ |
2,518 |
|
|
$ |
2,361 |
|
|
$ |
157 |
|
|
$ |
2,325 |
|
|
$ |
2,288 |
|
|
$ |
37 |
|
|
(1) |
Excludes compensation and benefits related to reconditioning and vehicle repair service, which are included in cost of sales. |
|
(2) |
Includes IT expenses, insurance, preopening and relocation costs, non-CAF bad debt, travel, 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) |
2019 |
|
% (1) |
|
2018 |
|
% (1) |
|
2019 |
|
% (1) |
|
2018 |
|
% (1) |
|||||||||||||
Interest margin: |
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Interest and fee income |
$ |
278.9 |
|
8.4 |
|
$ |
247.8 |
|
8.0 |
|
|
$ |
820.8 |
|
8.4 |
|
$ |
722.3 |
|
8.0 |
|
|||||||
Interest expense |
(90.4 |
) |
(2.7 |
) |
(75.3 |
) |
(2.4 |
) |
|
(268.4 |
) |
(2.8 |
) |
(208.2 |
) |
(2.3 |
) |
|||||||||||
Total interest margin |
188.5 |
|
5.7 |
|
172.5 |
|
5.6 |
|
|
552.4 |
|
5.7 |
|
514.1 |
|
5.7 |
|
|||||||||||
Provision for loan losses |
(49.0 |
) |
(1.5 |
) |
(40.8 |
) |
(1.3 |
) |
|
(132.7 |
) |
(1.4 |
) |
(111.7 |
) |
(1.2 |
) |
|||||||||||
Total interest margin after provision for loan losses |
139.5 |
|
4.2 |
|
131.7 |
|
4.3 |
|
|
419.7 |
|
4.3 |
|
402.4 |
|
4.5 |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total other expense |
— |
|
— |
|
(0.1 |
) |
— |
|
|
— |
|
— |
|
(0.4 |
) |
— |
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total direct expenses |
(25.5 |
) |
(0.8 |
) |
(21.9 |
) |
(0.7 |
) |
|
(75.6 |
) |
(0.8 |
) |
(67.0 |
) |
(0.7 |
) |
|||||||||||
CarMax Auto Finance income |
$ |
114.0 |
|
3.4 |
|
$ |
109.7 |
|
3.6 |
|
|
$ |
344.1 |
|
3.5 |
|
$ |
335.0 |
|
3.7 |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total average managed receivables |
$ |
13,239.2 |
|
|
$ |
12,321.0 |
|
|
|
$ |
12,986.2 |
|
|
$ |
12,054.6 |
|
|
|||||||||||
Net loans originated |
$ |
1,698.2 |
|
|
$ |
1,503.7 |
|
|
|
$ |
5,297.1 |
|
|
$ |
4,847.6 |
|
|
|||||||||||
Net penetration rate |
43.3 |
% |
|
44.1 |
% |
|
|
42.3 |
% |
|
43.6 |
% |
|
|||||||||||||||
Weighted average contract rate |
8.1 |
% |
|
8.5 |
% |
|
|
8.5 |
% |
|
8.5 |
% |
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Ending allowance for loan losses |
$ |
153.6 |
|
|
$ |
138.3 |
|
|
|
$ |
153.6 |
|
|
$ |
138.3 |
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Warehouse facility information: |
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Ending funded receivables |
$ |
2,305.7 |
|
|
$ |
1,993.0 |
|
|
|
$ |
2,305.7 |
|
|
$ |
1,993.0 |
|
|
|||||||||||
Ending unused capacity |
$ |
1,194.3 |
|
|
$ |
1,257.0 |
|
|
|
$ |
1,194.3 |
|
|
$ |
1,257.0 |
|
|
|||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
(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) |
2019 |
|
2018 |
|
Change |
|
2019 |
|
2018 |
|
Change |
|||||||||||
Net earnings |
$ |
173.2 |
|
|
$ |
190.3 |
|
|
(9.0 |
)% |
|
$ |
673.5 |
|
|
$ |
649.9 |
|
|
3.6 |
% |
|
Diluted weighted average shares outstanding |
166.5 |
|
|
175.3 |
|
|
(5.0 |
)% |
|
167.2 |
|
|
177.7 |
|
|
(5.9 |
)% |
|||||
Net earnings per diluted share |
$ |
1.04 |
|
|
$ |
1.09 |
|
|
(4.6 |
)% |
|
$ |
4.03 |
|
|
$ |
3.66 |
|
|
10.1 |
% |
|
Store Openings
During the third quarter of fiscal 2020, we opened four stores -- two in new markets (Palm Springs, California and Gulfport, Mississippi) and two in existing markets (Dallas, Texas and Atlanta, Georgia).
We currently plan to open the following stores during the 12 months ending November 30, 2020. During this period, we will be entering one new television market and expanding our presence in eight existing television markets. Of the 11 stores we plan to open during this period, 3 will be in Metropolitan Statistical Areas having populations of 600,000 or less, which we define as small markets. Normal construction, permitting or other scheduling delays could shift the opening dates of any of these stores into a later period.
|
|
|
|
|||
Location |
|
Television Market |
|
Metropolitan Statistical Area |
|
Planned Opening Date |
Fort Wayne, Indiana |
Fort Wayne (1) |
Fort Wayne |
Q4 Fiscal 2020 |
|||
Salem, Oregon |
Portland |
Salem |
Q4 Fiscal 2020 |
|||
Murfreesboro, Tennessee |
Nashville |
Nashville/Davidson/Murfreesboro |
Q4 Fiscal 2020 |
|||
Easton, Pennsylvania |
Philadelphia |
Allentown/Bethlehem/Easton |
Q1 Fiscal 2021 |
|||
Bradenton, Florida |
Tampa |
North Port/Sarasota/Bradenton |
Q1 Fiscal 2021 |
|||
Canoga Park, California |
Los Angeles |
Los Angeles |
Q1 Fiscal 2021 |
|||
Covington, Louisiana |
New Orleans |
New Orleans |
Q1 Fiscal 2021 |
|||
West Palm Beach, Florida |
Miami/Ft. Lauderdale/W. Palm Beach |
Miami/Ft. Lauderdale/W. Palm Beach |
Q2 Fiscal 2021 |
|||
Jacksonville, N. Carolina |
Greenville/New Bern/Washington |
Jacksonville |
Q2 Fiscal 2021 |
|||
Lakeland, Florida |
Tampa |
Lakeland/Winter Haven |
Q3 Fiscal 2021 |
|||
Norco, California |
Los Angeles |
Riverside/San Bernardino/Ontario |
Q3 Fiscal 2021 |
|||
(1) |
Represents new television market as of planned store opening date. |
|
Conference Call Information
We will host a conference call for investors at 9:00 a.m. ET today, December 20, 2019. 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 1888153. 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 1, 2020. A telephone replay also will be available for approximately one week 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 1888153.
Fourth Quarter Fiscal 2020 Earnings Release Date
We currently plan to release results for the fourth quarter and fiscal year ending February 29, 2020, on Thursday, April 2, 2020, 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 2020.
About CarMax
CarMax, the nation’s largest retailer of used cars, revolutionized the automotive retail industry by driving integrity, honesty and transparency in every interaction. CarMax continues to innovate and is currently rolling out an omni-channel experience, providing customers the option to complete transactions entirely from home, in store, or in a seamless combination of both. CarMax has more than 200 stores nationwide, and during the latest fiscal year sold nearly 750,000 used cars and 450,000 wholesale vehicles at its in-store auctions. With more than 25,000 associates, CarMax is proud to have been recognized for 15 consecutive years as one of the Fortune 100 Best Companies to Work For®. For more information, visit 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, tax rates 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.
- Our inability to realize the benefits associated with our omni-channel initiatives.
- 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 volatility in the market price for our common stock.
- 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, 2019, 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 (804) 747-0422 x7865. 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) |
2019 |
|
% (1) |
|
2018 |
|
% (1) |
|
2019 |
|
% (1) |
|
2018 |
|
% (1) |
|||||||||||||
SALES AND OPERATING REVENUES: |
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Used vehicle sales |
$ |
4,028,811 |
|
84.1 |
|
$ |
3,547,925 |
|
82.6 |
|
|
$ |
12,915,763 |
|
84.1 |
|
$ |
11,544,340 |
|
83.3 |
|
|||||||
Wholesale vehicle sales |
610,983 |
|
12.8 |
|
603,584 |
|
14.1 |
|
|
1,951,718 |
|
12.7 |
|
1,849,225 |
|
13.3 |
|
|||||||||||
Other sales and revenues |
150,234 |
|
3.1 |
|
144,362 |
|
3.4 |
|
|
490,016 |
|
3.2 |
|
460,933 |
|
3.3 |
|
|||||||||||
NET SALES AND OPERATING REVENUES |
4,790,028 |
|
100.0 |
|
4,295,871 |
|
100.0 |
|
|
15,357,497 |
|
100.0 |
|
13,854,498 |
|
100.0 |
|
|||||||||||
COST OF SALES: |
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Used vehicle cost of sales |
3,615,704 |
|
75.5 |
|
3,177,953 |
|
74.0 |
|
|
11,549,445 |
|
75.2 |
|
10,305,945 |
|
74.4 |
|
|||||||||||
Wholesale vehicle cost of sales |
504,177 |
|
10.5 |
|
498,840 |
|
11.6 |
|
|
1,601,573 |
|
10.4 |
|
1,518,698 |
|
11.0 |
|
|||||||||||
Other cost of sales |
56,500 |
|
1.2 |
|
49,841 |
|
1.2 |
|
|
156,996 |
|
1.0 |
|
148,642 |
|
1.1 |
|
|||||||||||
TOTAL COST OF SALES |
4,176,381 |
|
87.2 |
|
3,726,634 |
|
86.7 |
|
|
13,308,014 |
|
86.7 |
|
11,973,285 |
|
86.4 |
|
|||||||||||
GROSS PROFIT |
613,647 |
|
12.8 |
|
569,237 |
|
13.3 |
|
|
2,049,483 |
|
13.3 |
|
1,881,213 |
|
13.6 |
|
|||||||||||
CARMAX AUTO FINANCE INCOME |
114,033 |
|
2.4 |
|
109,725 |
|
2.6 |
|
|
344,123 |
|
2.2 |
|
334,985 |
|
2.4 |
|
|||||||||||
Selling, general and administrative expenses |
484,848 |
|
10.1 |
|
409,520 |
|
9.5 |
|
|
1,455,339 |
|
9.5 |
|
1,301,308 |
|
9.4 |
|
|||||||||||
Interest expense |
21,843 |
|
0.5 |
|
18,814 |
|
0.4 |
|
|
60,700 |
|
0.4 |
|
54,816 |
|
0.4 |
|
|||||||||||
Other (income) expense |
(6,570 |
) |
(0.1 |
) |
2,820 |
|
0.1 |
|
|
(6,786 |
) |
— |
|
3,097 |
|
— |
|
|||||||||||
Earnings before income taxes |
227,559 |
|
4.8 |
|
247,808 |
|
5.8 |
|
|
884,353 |
|
5.8 |
|
856,977 |
|
6.2 |
|
|||||||||||
Income tax provision |
54,403 |
|
1.1 |
|
57,497 |
|
1.3 |
|
|
210,854 |
|
1.4 |
|
207,120 |
|
1.5 |
|
|||||||||||
NET EARNINGS |
$ |
173,156 |
|
3.6 |
|
$ |
190,311 |
|
4.4 |
|
|
$ |
673,499 |
|
4.4 |
|
$ |
649,857 |
|
4.7 |
|
|||||||
WEIGHTED AVERAGE COMMON SHARES: |
|
|
|
|
|
|
|
|
||||||||||||||||||||
Basic |
164,273 |
|
|
173,816 |
|
|
|
165,321 |
|
|
176,088 |
|
|
|||||||||||||||
Diluted |
166,534 |
|
|
175,321 |
|
|
|
167,154 |
|
|
177,656 |
|
|
|||||||||||||||
NET EARNINGS PER SHARE: |
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Basic |
$ |
1.05 |
|
|
$ |
1.09 |
|
|
|
$ |
4.07 |
|
|
$ |
3.69 |
|
|
|||||||||||
Diluted |
$ |
1.04 |
|
|
$ |
1.09 |
|
|
|
$ |
4.03 |
|
|
$ |
3.66 |
|
|
|||||||||||
(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) |
2019 |
|
2019 (1) |
|
2018 (1) |
|||||||
ASSETS |
|
|
|
|
|
|||||||
CURRENT ASSETS: |
|
|
|
|
|
|||||||
Cash and cash equivalents |
$ |
56,583 |
|
|
$ |
46,938 |
|
|
$ |
35,049 |
|
|
Restricted cash from collections on auto loan receivables |
458,493 |
|
|
440,669 |
|
|
426,613 |
|
||||
Accounts receivable, net |
142,737 |
|
|
139,850 |
|
|
111,156 |
|
||||
Inventory |
2,682,574 |
|
|
2,519,455 |
|
|
2,424,700 |
|
||||
Other current assets |
109,857 |
|
|
67,101 |
|
|
59,901 |
|
||||
TOTAL CURRENT ASSETS |
3,450,244 |
|
|
3,214,013 |
|
|
3,057,419 |
|
||||
Auto loan receivables, net |
13,276,654 |
|
|
12,428,487 |
|
|
12,299,270 |
|
||||
Property and equipment, net |
3,036,663 |
|
|
2,828,058 |
|
|
2,800,051 |
|
||||
Deferred income taxes |
67,162 |
|
|
61,346 |
|
|
57,893 |
|
||||
Operating lease assets |
454,708 |
|
|
— |
|
|
— |
|
||||
Other assets |
201,799 |
|
|
185,963 |
|
|
182,179 |
|
||||
TOTAL ASSETS |
$ |
20,487,230 |
|
|
$ |
18,717,867 |
|
|
$ |
18,396,812 |
|
|
|
|
|
|
|
|
|||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
|||||||
CURRENT LIABILITIES: |
|
|
|
|
|
|||||||
Accounts payable |
$ |
641,434 |
|
|
$ |
593,171 |
|
|
$ |
558,324 |
|
|
Accrued expenses and other current liabilities |
340,475 |
|
|
318,204 |
|
|
281,012 |
|
||||
Accrued income taxes |
1,497 |
|
|
3,784 |
|
|
1,634 |
|
||||
Current portion of operating lease liabilities |
30,813 |
|
|
— |
|
|
— |
|
||||
Short-term debt |
421 |
|
|
1,129 |
|
|
436 |
|
||||
Current portion of long-term debt |
8,541 |
|
|
10,177 |
|
|
10,184 |
|
||||
Current portion of non-recourse notes payable |
397,860 |
|
|
385,044 |
|
|
373,283 |
|
||||
TOTAL CURRENT LIABILITIES |
1,421,041 |
|
|
1,311,509 |
|
|
1,224,873 |
|
||||
Long-term debt, excluding current portion |
1,704,284 |
|
|
1,649,244 |
|
|
1,478,503 |
|
||||
Non-recourse notes payable, excluding current portion |
12,899,970 |
|
|
12,127,290 |
|
|
11,997,315 |
|
||||
Operating lease liabilities, excluding current portion |
446,302 |
|
|
— |
|
|
— |
|
||||
Other liabilities |
317,580 |
|
|
272,796 |
|
|
261,008 |
|
||||
TOTAL LIABILITIES |
16,789,177 |
|
|
15,360,839 |
|
|
14,961,699 |
|
||||
|
|
|
|
|
|
|||||||
Commitments and contingent liabilities |
|
|
|
|
|
|||||||
SHAREHOLDERS’ EQUITY: |
|
|
|
|
|
|||||||
Common stock, $0.50 par value; 350,000,000 shares authorized; 163,795,082 and 167,478,924 shares issued and outstanding as of November 30, 2019 and February 28, 2019, respectively |
81,897 |
|
|
83,739 |
|
|
85,893 |
|
||||
Capital in excess of par value |
1,321,567 |
|
|
1,237,153 |
|
|
1,255,966 |
|
||||
Accumulated other comprehensive loss |
(82,007 |
) |
|
(68,010 |
) |
|
(54,137 |
) |
||||
Retained earnings |
2,376,596 |
|
|
2,104,146 |
|
|
2,147,391 |
|
||||
TOTAL SHAREHOLDERS’ EQUITY |
3,698,053 |
|
|
3,357,028 |
|
|
3,435,113 |
|
||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
$ |
20,487,230 |
|
|
$ |
18,717,867 |
|
|
$ |
18,396,812 |
|
|
(1) |
In connection with our adoption of ASC 842, the new accounting standard for leases, during the first quarter of fiscal 2020, certain prior period amounts have been reclassified to conform to the current period’s presentation. Financing obligations have been reclassified to Current portion of long-term debt and Long-term debt, excluding current portion. Capital lease obligations have been reclassified to Accrued expenses and other current liabilities and Other liabilities. |
|
CARMAX, INC. AND SUBSIDIARIES |
||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS |
||||||||
(UNAUDITED) |
||||||||
|
Nine Months Ended November 30 |
|||||||
(In thousands) |
2019 |
|
2018 (1) |
|||||
OPERATING ACTIVITIES: |
|
|
|
|||||
Net earnings |
$ |
673,499 |
|
|
$ |
649,857 |
|
|
Adjustments to reconcile net earnings to net cash (used in) provided by operating activities: |
|
|
|
|||||
Depreciation and amortization |
158,226 |
|
|
135,609 |
|
|||
Share-based compensation expense |
98,177 |
|
|
61,403 |
|
|||
Provision for loan losses |
132,650 |
|
|
111,703 |
|
|||
Provision for cancellation reserves |
65,166 |
|
|
54,952 |
|
|||
Deferred income tax (benefit) provision |
(744 |
) |
|
909 |
|
|||
Other |
(72 |
) |
|
4,104 |
|
|||
Net (increase) decrease in: |
|
|
|
|||||
Accounts receivable, net |
(2,887 |
) |
|
22,165 |
|
|||
Inventory |
(163,119 |
) |
|
(34,006 |
) |
|||
Other current assets |
(41,869 |
) |
|
40,952 |
|
|||
Auto loan receivables, net |
(980,817 |
) |
|
(875,269 |
) |
|||
Other assets |
10,185 |
|
|
(6,734 |
) |
|||
Net increase (decrease) in: |
|
|
|
|||||
Accounts payable, accrued expenses and other current liabilities and accrued income taxes |
20,604 |
|
|
22,236 |
|
|||
Other liabilities |
(86,905 |
) |
|
(73,251 |
) |
|||
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES |
(117,906 |
) |
|
114,630 |
|
|||
INVESTING ACTIVITIES: |
|
|
|
|||||
Capital expenditures |
(249,177 |
) |
|
(243,311 |
) |
|||
Proceeds from disposal of property and equipment |
3 |
|
|
680 |
|
|||
Purchases of investments |
(8,438 |
) |
|
(5,470 |
) |
|||
Sales of investments |
1,025 |
|
|
1,104 |
|
|||
NET CASH USED IN INVESTING ACTIVITIES |
(256,587 |
) |
|
(246,997 |
) |
|||
FINANCING ACTIVITIES: |
|
|
|
|||||
(Decrease) increase in short-term debt, net |
(708 |
) |
|
309 |
|
|||
Proceeds from issuances of long-term debt |
4,707,500 |
|
|
2,758,000 |
|
|||
Payments on long-term debt |
(4,702,807 |
) |
|
(2,768,419 |
) |
|||
Cash paid for debt issuance costs |
(14,849 |
) |
|
(12,329 |
) |
|||
Payments on finance lease obligations |
(2,813 |
) |
|
(528 |
) |
|||
Issuances of non-recourse notes payable |
8,596,000 |
|
|
8,183,502 |
|
|||
Payments on non-recourse notes payable |
(7,810,958 |
) |
|
(7,435,128 |
) |
|||
Repurchase and retirement of common stock |
(458,587 |
) |
|
(633,170 |
) |
|||
Equity issuances |
96,367 |
|
|
54,580 |
|
|||
NET CASH PROVIDED BY FINANCING ACTIVITIES |
409,145 |
|
|
146,817 |
|
|||
Increase in cash, cash equivalents, and restricted cash |
34,652 |
|
|
14,450 |
|
|||
Cash, cash equivalents, and restricted cash at beginning of year |
595,377 |
|
|
554,898 |
|
|||
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD |
$ |
630,029 |
|
|
$ |
569,348 |
|
|
(1) |
In connection with the changes to the Consolidated Balance Sheets as a result of our adoption of ASC 842, the new accounting standard for leases, during the first quarter of fiscal 2020, payments on financing obligations have been reclassified to payments on long-term debt. Prior period amounts have been reclassified to conform to the current period’s presentation. |
|
