CarMax, Inc. (NYSE:KMX) today reported results for the second
quarter ended August 31, 2022.
Highlights:
- Net revenues of $8.1 billion, up 2.0% compared with the prior
year second quarter.
- Total retail used units sold decreased 6.4%, while used unit
sales in comparable stores were down 8.3%; gross profit per retail
used unit was $2,282, an increase of $97 per unit despite steep
market depreciation.
- CarMax’s share of the nationwide 0-10 year old vehicle market
continued to increase through July, the latest period for which
title data is available.
- Total wholesale units decreased 15.1% with gross profit per
unit of $881, a decrease of $124 per unit; both volume and margins
were impacted by retail selectivity and steep market
depreciation.
- Bought 342,731 vehicles from consumers and dealers, down 8.1%
versus last year’s second quarter but up approximately 50% as
compared to the pre-Instant Offer launch in the second quarter of
FY21.
- 322,543 of these vehicles were from consumers, down 11.5% over
last year’s record results.
- 20,188 of these vehicles were through MaxOffer, our digital
appraisal product for dealers, up 130.4% over last year’s second
quarter, and up 18% compared to this year’s first quarter.
- CarMax Auto Finance (CAF) income of $182.9 million, an 8.6%
year-over-year decline as a $40.0 million swing in the provision
for loan losses, primarily reflecting a significant tailwind in the
prior year, outweighed the effects of growth in CAF’s net interest
margin and average managed receivables. Net interest margin
improved to 7.3% of average managed receivables, up from 7.2% in
the prior year’s second quarter.
- Expanded our industry-leading pre-qualification finance
experience to over 50% of customers; national rollout expected to
be complete in the third quarter of fiscal 2023.
- Net earnings per diluted share of $0.79, down from $1.72 a year
ago.
CEO Commentary:
“While this was a challenging quarter across the used car
industry, our ongoing progress in strengthening and expanding our
omnichannel experience continues to positively differentiate us and
enable us to grow market share,” said Bill Nash, president and
chief executive officer. “As we navigate the near-term pressures
facing our industry, we are further sharpening our focus on driving
additional operational efficiencies across our business. We will
also remain focused on continuing our work to achieve our long-term
goals, including further improving our omnichannel experience for
our customers and associates through enhancing the seamlessness of
our online and in-store offerings and growing our diversified
business model.”
Second Quarter Business Performance
Review:
Sales. Combined retail and
wholesale used vehicle unit sales were 376,616, a decrease of 10.3%
from the prior year’s second quarter. Online retail sales(1)
accounted for 11% of retail unit sales, compared with 9% in the
second quarter of last year. Revenue from online transactions(2),
including retail and wholesale unit sales, was $2.4 billion, or
approximately 30% of net revenues, compared with 28% of net
revenues in last year’s second quarter.
Total retail used vehicle unit sales declined 6.4% to 216,939
and comparable store used unit sales declined 8.3% from the prior
year’s second quarter. Comparable store sales saw a low
single-digit decline in June and then fell sharply through the end
of the quarter. We believe a number of macroeconomic factors
impacted our second quarter unit sales performance, such as vehicle
affordability challenges that stem from widespread inflationary
pressures, as well as climbing interest rates and low consumer
confidence. Total retail used vehicle revenues increased 2.9%
compared with the prior year’s second quarter due to an increase in
the average retail selling price, which rose approximately $2,500
per unit, or 9.6%, partially offset by the decrease in retail used
units sold.
Total wholesale vehicle unit sales decreased 15.1% to 159,677
versus the prior year’s second quarter. Wholesale volume was
negatively impacted by retail selectivity, or our decision to shift
some units from wholesale to retail to meet consumer demand for
lower priced vehicles, and as we intentionally slowed buys in
reaction to rapidly changing market conditions. Total wholesale
revenues decreased 0.7% compared with the prior year’s second
quarter due to the decrease in wholesale units sold, partially
offset by the average wholesale selling price rising by almost
$1,500 per unit, or 17.0%.
Other sales and revenues declined by 6.6% compared with the
second quarter of fiscal 2022, representing a decrease of $12.0
million. The decrease was driven by the divestiture of our
remaining new car franchise in the third quarter of fiscal 2022 as
well as a $3.2 million decline in extended protection plan (EPP)
revenues reflecting the combined effects of stronger margins,
stable penetration and the decline in retail unit sales.
Gross Profit. Total gross
profit was $737.1 million, down 9.6% versus last year’s second
quarter. Retail used vehicle gross profit declined 2.3%, reflecting
the combined effects of the decline in retail unit sales and an
improvement in the related gross profit per unit, which rose $97 to
$2,282.
Wholesale vehicle gross profit decreased 25.6% versus the prior
year’s quarter, reflecting lower wholesale unit volume and gross
profit per unit, which declined $124 to $881. Gross profit per unit
was impacted by both retail selectivity as well as steep market
depreciation.
Other gross profit declined 15.4% largely reflecting a reduction
in service department margins and EPP revenues. Service margins
declined primarily due to deleverage resulting from the reduction
in retail unit sales and inflationary pressures.
SG&A. Compared with the
second quarter of fiscal 2022, SG&A expenses increased 16.0% to
$666.0 million. Contributing factors included the effect of
increases in staffing and wage pressures over the past year,
investments to advance our technology platforms, as well as
strategic and growth initiatives. The change in SG&A was also
negatively impacted by a $14 million one-time prior year change in
accounting estimate related to non-CAF uncollectible receivables.
Partially offsetting these items was a reduction in share-based
compensation, which largely reflected changes in the company’s
share price, as well as actions taken in the first and second
quarters to better align costs to sales performance. SG&A as a
percent of gross profit was 90.4%, versus 70.4% in the prior year’s
second quarter driven by the expenses noted above, combined with
the decrease in gross margin dollars.
CarMax Auto
Finance.(3) CAF income decreased 8.6% to $182.9
million, driven by a $40.0 million year- over-year swing in the
provision for loan losses. This quarter’s provision was $75.5
million compared to $35.5 million last year, which outweighed the
growth in CAF’s net interest margin and average managed
receivables. Last year, our loan loss provision was a significant
tailwind as the overall performance of the consumer remained
remarkably strong.
As of August 31, 2022, the allowance for loan losses was 2.92%
of ending managed receivables, up from 2.85% as of May 31, 2022.
The increase in the allowance percentage primarily reflected the
effect of the previously disclosed expansion of Tier 2 and Tier 3
originations within CAF’s portfolio.
CAF’s total interest margin percentage, which represents the
spread between interest and fees charged to consumers and our
funding costs, was 7.3% of average managed receivables, up from
7.2% in the prior year’s second quarter, and benefited from our
hedging strategy. After the effect of 3-day payoffs, CAF financed
41.2% of units sold in the current quarter up from 39.3% in the
first quarter, but down from 43.0% in the prior year’s second
quarter, largely reflecting an increase in the mix of customers
utilizing outside financing. CAF’s weighted average contract rate
increased to 9.4% in the quarter up from 8.5% in the second quarter
last year.
Interest Expense. Interest
expense increased $10.3 million to $32.7 million, reflecting a
higher outstanding debt balance in the current fiscal year,
including the $700 million term loan issued in October 2021, as
well as higher interest rates.
Share Repurchase Activity.
During the second quarter of fiscal 2023, we repurchased 1.7
million shares of common stock for $163.0 million pursuant to our
share repurchase program. As of August 31, 2022, we had $2.45
billion remaining available for repurchase under the outstanding
authorization.
Store Openings. During the
second quarter of fiscal 2023, we opened three new retail locations
in Stockton, California, Wayne, New Jersey and East Meadow, New
York, bringing our total retail stores in the New York metro market
up to three locations. In fiscal 2023, we plan to open a total of
ten new locations across the country.
(1)
An online retail unit sale is defined as a
sale where the customer completes all four of these major
transactional activities remotely: reserving the vehicle; financing
the vehicle, if needed; trading-in or opting out of a trade in; and
creating a remote sales order.
(2)
Revenue from online transactions is
defined as revenue from retail sales that qualify for an online
retail sale, as well as any EPP and third-party finance
contribution, wholesale sales where the winning bid was an online
bid, and all revenue earned by Edmunds.
(3)
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 August
31
Six Months Ended August
31
(In millions)
2022
2021
Change
2022
2021
Change
Used vehicle sales
$
6,284.1
$
6,104.4
2.9
%
$
13,298.6
$
12,261.7
8.5
%
Wholesale vehicle sales
1,690.3
1,701.6
(0.7
) %
3,806.8
3,075.9
23.8
%
Other sales and revenues:
Extended protection plan revenues
109.8
113.0
(2.9
) %
226.3
247.3
(8.5
) %
Third-party finance income/(fees), net
2.7
2.8
(1.8
) %
6.1
(1.8
)
437.5
%
Advertising & subscription revenues
(1)
34.3
34.5
(0.8
) %
68.7
34.5
98.7
%
Other
23.6
32.1
(26.4
) %
49.9
68.3
(26.9
) %
Total other sales and revenues
170.4
182.4
(6.6
) %
351.0
348.3
0.8
%
Total net sales and operating revenues
$
8,144.8
$
7,988.4
2.0
%
$
17,456.4
$
15,686.0
11.3
%
(1)
Excludes intersegment revenues that have
been eliminated in consolidation.
Unit Sales
Three Months Ended August
31
Six Months Ended August
31
2022
2021
Change
2022
2021
Change
Used vehicles
216,939
231,797
(6.4) %
457,889
502,596
(8.9) %
Wholesale vehicles
159,677
188,098
(15.1) %
345,984
369,487
(6.4) %
Average Selling Prices
Three Months Ended August
31
Six Months Ended August
31
2022
2021
Change
2022
2021
Change
Used vehicles
$ 28,657
$ 26,141
9.6 %
$ 28,755
$ 24,197
18.8 %
Wholesale vehicles
$ 10,179
$ 8,701
17.0 %
$ 10,619
$ 7,997
32.8 %
Vehicle Sales Changes
Three Months Ended August
31
Six Months Ended August
31
2022
2021
2022
2021
Used vehicle units
(6.4) %
6.7 %
(8.9) %
42.6 %
Used vehicle revenues
2.9 %
39.1 %
8.5 %
70.9 %
Wholesale vehicle units
(15.1) %
41.4 %
(6.4) %
88.2 %
Wholesale vehicle revenues
(0.7) %
107.7 %
23.8 %
164.7 %
Comparable Store Used Vehicle Sales
Changes (1)
Three Months Ended August
31
Six Months Ended August
31
2022
2021
2022
2021
Used vehicle units
(8.3) %
6.2 %
(10.6) %
41.8 %
Used vehicle revenues
0.4 %
38.8 %
6.0 %
70.4 %
(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 August
31
Six Months Ended August
31
2022
2021
2022
2021
CAF (2)
44.8 %
47.1 %
44.0 %
46.9 %
Tier 2 (3)
21.6 %
21.6 %
23.5 %
22.2 %
Tier 3 (4)
6.0 %
7.2 %
6.6 %
8.7 %
Other (5)
27.6 %
24.1 %
25.9 %
22.2 %
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 2 and Tier 3 loan
originations, which represent approximately 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 August
31
Six Months Ended August
31
(In millions)
2022
% (1)
2021
% (1)
2022
% (1)
2021
% (1)
Net sales and operating revenues
$
8,144.8
100.0
$
7,988.4
100.0
$
17,456.4
100.0
$
15,686.0
100.0
Gross profit
$
737.1
9.1
$
815.5
10.2
$
1,612.5
9.2
$
1,740.0
11.1
CarMax Auto Finance income
$
182.9
2.2
$
200.0
2.5
$
387.3
2.2
$
441.8
2.8
Selling, general, and administrative
expenses
$
666.0
8.2
$
574.3
7.2
$
1,322.8
7.6
$
1,128.4
7.2
Interest expense
$
32.7
0.4
$
22.4
0.3
$
61.5
0.4
$
42.9
0.3
Earnings before income taxes
$
167.6
2.1
$
367.8
4.6
$
504.2
2.9
$
935.1
6.0
Net earnings
$
125.9
1.5
$
285.3
3.6
$
378.2
2.2
$
722.0
4.6
(1)
Calculated as a percentage of net sales and operating
revenues.
Gross Profit (1)
Three Months Ended August
31
Six Months Ended August
31
(In millions)
2022
2021
Change
2022
2021
Change
Used vehicle gross profit
$
495.0
$
506.5
(2.3
) %
$
1,058.5
$
1,103.5
(4.1
) %
Wholesale vehicle gross profit
140.7
189.0
(25.6
) %
332.3
374.9
(11.3
) %
Other gross profit
101.4
120.0
(15.4
) %
221.7
261.6
(15.2
) %
Total
$
737.1
$
815.5
(9.6
) %
$
1,612.5
$
1,740.0
(7.3
) %
(1)
Amounts are net of intercompany
eliminations.
Gross Profit per Unit
(1)
Three Months Ended August
31
Six Months Ended August
31
2022
2021
2022
2021
$ per unit(2)
%(3)
$ per unit(2)
%(3)
$ per unit(2)
%(3)
$ per unit(2)
%(3)
Used vehicle gross profit
$
2,282
7.9
$
2,185
8.3
$
2,312
8.0
$
2,196
9.0
Wholesale vehicle gross profit
$
881
8.3
$
1,005
11.1
$
961
8.7
$
1,015
12.2
Other gross profit
$
468
59.6
$
517
65.8
$
484
63.2
$
521
75.1
(1)
Amounts are net of intercompany
eliminations. Those eliminations had the effect of increasing used
vehicle gross profit per unit and wholesale vehicle gross profit
per unit and decreasing other gross profit per unit by immaterial
amounts.
(2)
Calculated as category gross profit
divided by its respective units sold, except the other category,
which is divided by total used units sold.
(3)
Calculated as a percentage of its
respective sales or revenue.
SG&A Expenses (1)
Three Months Ended August
31
Six Months Ended August
31
(In millions)
2022
2021
Change
2022
2021
Change
Compensation and benefits:
Compensation and benefits, excluding
share-based compensation expense
$
333.8
$
299.5
11.4
%
$
679.0
$
583.6
16.3
%
Share-based compensation expense
24.5
28.7
(14.5
) %
46.8
67.1
(30.3
) %
Total compensation and benefits (2)
$
358.3
$
328.2
9.2
%
$
725.8
$
650.7
11.5
%
Occupancy costs
68.8
55.1
25.0
%
134.7
105.6
27.5
%
Advertising expense
82.9
85.0
(2.5
) %
171.8
157.5
9.1
%
Other overhead costs (3)
156.0
106.0
47.2
%
290.5
214.6
35.5
%
Total SG&A expenses
$
666.0
$
574.3
16.0
%
$
1,322.8
$
1,128.4
17.2
%
SG&A as % of gross profit
90.4
%
70.4
%
20.0
%
82.0
%
64.8
%
17.2
%
(1)
Amounts are net of intercompany
eliminations.
(2)
Excludes compensation and benefits related
to reconditioning and vehicle repair service, which are included in
cost of sales.
(3)
Includes IT expenses, non-CAF bad debt,
insurance, preopening and relocation costs, charitable
contributions, travel and other administrative expenses.
Components of CAF Income and Other CAF
Information
Three Months Ended August
31
Six Months Ended August
31
(In millions)
2022
% (1)
2021
% (1)
2022
% (1)
2021
% (1)
Interest margin:
Interest and fee income
$
357.2
8.8
$
324.1
8.8
$
703.9
8.8
$
634.4
8.8
Interest expense
(62.5
)
(1.5
)
(60.6
)
(1.7
)
(111.3
)
(1.4
)
(126.4
)
(1.8
)
Total interest margin
294.7
7.3
263.5
7.2
592.6
7.4
508.0
7.0
Provision for loan losses
(75.5
)
(1.9
)
(35.5
)
(1.0
)
(133.3
)
(1.7
)
(11.1
)
(0.2
)
Total interest margin after provision for
loan losses
219.2
5.4
228.0
6.2
459.3
5.7
496.9
6.9
Total direct expenses
(36.3
)
(0.9
)
(27.9
)
(0.8
)
(71.9
)
(0.9
)
(55.1
)
(0.8
)
CarMax Auto Finance income
$
182.9
4.5
$
200.0
5.4
$
387.3
4.8
$
441.8
6.1
Total average managed receivables
$
16,176.2
$
14,683.3
$
15,996.6
$
14,416.0
Net loans originated
$
2,334.0
$
2,372.4
$
4,780.8
$
4,855.8
Net penetration rate
41.2
%
43.0
%
40.2
%
43.4
%
Weighted average contract rate
9.4
%
8.5
%
9.2
%
8.7
%
Ending allowance for loan losses
$
477.5
$
398.1
$
477.5
$
398.1
Warehouse facility information:
Ending funded receivables
$
2,997.9
$
3,181.9
$
2,997.9
$
3,181.9
Ending unused capacity
$
2,402.1
$
1,643.1
$
2,402.1
$
1,643.1
(1)
Annualized percentage of total average managed receivables.
Earnings Highlights
Three Months Ended August
31
Six Months Ended August
31
(In millions except per share data)
2022
2021
Change
2022
2021
Change
Net earnings
$
125.9
$
285.3
(55.9
) %
$
378.2
$
722.0
(47.6
) %
Diluted weighted average shares
outstanding
160.2
165.6
(3.3
) %
161.0
166.0
(3.0
) %
Net earnings per diluted share
$
0.79
$
1.72
(54.1
) %
$
2.35
$
4.35
(46.0
) %
Conference Call
Information
We will host a conference call for investors at 9:00 a.m. ET
today, September 29, 2022. Domestic investors may access the call
at 1-800-289-0720 (international callers dial 1-323-701-0160). The
conference I.D. for both domestic and international callers is
3170513. A live webcast of the call will be available on our
investor information home page at investors.carmax.com.
A replay of the webcast will be available on the company’s
website at investors.carmax.com through December 21, 2022, or via
telephone (for approximately one week) by dialing 1-888-203-1112
(or 1-719-457-0820 for international access) and entering the
conference ID 3170513.
Third Quarter Fiscal 2023 Earnings
Release Date
We currently plan to release results for the third quarter
ending November 30, 2022, on Thursday, December 22, 2022, 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 early
December 2022.
About CarMax
CarMax, the nation’s largest retailer of used autos,
revolutionized the automotive retail industry by driving integrity,
honesty and transparency in every interaction. The company offers a
truly personalized experience with the option for customers to do
as much, or as little, online and in-store as they want. CarMax
also provides a variety of vehicle delivery methods, including home
delivery, express pickup and appointments in its stores. During the
fiscal year ended February 28, 2022, CarMax sold approximately
924,000 used vehicles and 706,000 wholesale vehicles at its
auctions. In addition, CarMax Auto Finance originated more than $9
billion in receivables during fiscal 2022, adding to its nearly $16
billion portfolio. CarMax has more than 230 stores, more than
30,000 associates, and is proud to have been recognized for 18
consecutive years as one of the Fortune 100 Best Companies to Work
For®. CarMax is committed to making a positive impact on people,
communities and the environment. Learn more in the 2022
Responsibility Report. For more information, visit
www.carmax.com.
Forward-Looking
Statements
We caution readers that the statements contained in this release
that are not statements of historical fact, including statements
about our future business plans, operations, challenges,
opportunities or prospects, including without limitation any
statements or factors regarding expected operating capacity, sales,
inventory, market share, financial targets, revenue, margins,
expenses, liquidity, loan originations, 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,” “positioned,” “predict,” “should,”
“target,” “will” and other similar expressions, whether in the
negative or affirmative. Such forward-looking statements are based
upon management’s current knowledge, expectations and assumptions
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:
- The effect and consequences of the Coronavirus public health
crisis on matters including U.S. and local economies; our business
operations and continuity; the availability of corporate and
consumer financing; the health and productivity of our associates;
the ability of third-party providers to continue uninterrupted
service; and the regulatory environment in which we operate.
- Changes in general or regional U.S. economic conditions,
including the potential impact of Russia’s invasion of
Ukraine.
- Changes in the availability or cost of capital and working
capital financing, including changes related to the asset-backed
securitization market.
- 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.
- Our inability to realize the benefits associated with our
omni-channel initiatives and strategic investments.
- 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 loans receivable
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 performance of the third-party vendors we rely on for key
components of our business.
- The effect of various litigation matters.
- Adverse conditions affecting one or more automotive
manufacturers, and manufacturer recalls.
- The failure or inability to realize the benefits associated
with our strategic transactions.
- 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 failure or inability to adequately protect our intellectual
property.
- 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, 2022, 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 August
31
Six Months Ended August
31
(In thousands except per share data)
2022
%(1)
2021
%(1)
2022
%(1)
2021
%(1)
SALES AND OPERATING REVENUES:
Used vehicle sales
$
6,284,085
77.2
$
6,104,366
76.4
$
13,298,575
76.2
$
12,261,710
78.2
Wholesale vehicle sales
1,690,326
20.8
1,701,572
21.3
3,806,843
21.8
3,075,929
19.6
Other sales and revenues
170,392
2.1
182,421
2.3
351,006
2.0
348,319
2.2
NET SALES AND OPERATING
REVENUES
8,144,803
100.0
7,988,359
100.0
17,456,424
100.0
15,685,958
100.0
COST OF SALES:
Used vehicle cost of sales
5,789,098
71.1
5,597,842
70.1
12,240,108
70.1
11,158,179
71.1
Wholesale vehicle cost of sales
1,549,669
19.0
1,512,559
18.9
3,474,519
19.9
2,701,072
17.2
Other cost of sales
68,891
0.8
62,474
0.8
129,261
0.7
86,714
0.6
TOTAL COST OF SALES
7,407,658
90.9
7,172,875
89.8
15,843,888
90.8
13,945,965
88.9
GROSS PROFIT
737,145
9.1
815,484
10.2
1,612,536
9.2
1,739,993
11.1
CARMAX AUTO FINANCE INCOME
182,869
2.2
200,033
2.5
387,342
2.2
441,764
2.8
Selling, general, and administrative
expenses
666,041
8.2
574,286
7.2
1,322,781
7.6
1,128,355
7.2
Depreciation and amortization
57,692
0.7
52,789
0.7
113,340
0.6
102,679
0.7
Interest expense
32,745
0.4
22,410
0.3
61,520
0.4
42,944
0.3
Other income
(4,039
)
—
(1,782
)
—
(1,940
)
—
(27,359
)
(0.2
)
Earnings before income taxes
167,575
2.1
367,814
4.6
504,177
2.9
935,138
6.0
Income tax provision
41,670
0.5
82,547
1.0
126,007
0.7
213,115
1.4
NET EARNINGS
$
125,905
1.5
$
285,267
3.6
$
378,170
2.2
$
722,023
4.6
WEIGHTED AVERAGE COMMON SHARES:
Basic
158,801
162,966
159,556
163,058
Diluted
160,218
165,643
161,015
165,969
NET EARNINGS PER SHARE:
Basic
$
0.79
$
1.75
$
2.37
$
4.43
Diluted
$
0.79
$
1.72
$
2.35
$
4.35
(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
August 31
February 28
August 31
(In thousands except share data)
2022
2022
2021
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
$
56,772
$
102,716
$
58,095
Restricted cash from collections on auto
loans receivable
533,253
548,099
570,567
Accounts receivable, net
402,452
560,984
517,260
Inventory
4,671,685
5,124,569
4,105,458
Other current assets
208,297
212,922
119,916
TOTAL CURRENT ASSETS
5,872,459
6,549,290
5,371,296
Auto loans receivable, net
15,961,213
15,289,701
14,656,170
Property and equipment, net
3,312,605
3,209,068
3,128,896
Deferred income taxes
93,057
120,931
117,288
Operating lease assets
530,285
537,357
553,727
Goodwill
141,258
141,258
150,343
Other assets
559,666
490,659
475,602
TOTAL ASSETS
$
26,470,543
$
26,338,264
$
24,453,322
LIABILITIES AND SHAREHOLDERS’
EQUITY
CURRENT LIABILITIES:
Accounts payable
$
928,749
$
937,717
$
903,847
Accrued expenses and other current
liabilities
482,361
533,271
487,771
Accrued income taxes
—
—
422
Current portion of operating lease
liabilities
48,783
44,197
43,676
Short-term debt
—
—
167
Current portion of long-term debt
112,504
11,203
10,562
Current portion of non-recourse notes
payable
559,792
521,069
512,515
TOTAL CURRENT LIABILITIES
2,132,189
2,047,457
1,958,960
Long-term debt, excluding current
portion
2,511,417
3,255,304
2,190,415
Non-recourse notes payable, excluding
current portion
15,534,801
14,919,715
14,439,700
Operating lease liabilities, excluding
current portion
512,542
523,269
538,296
Other liabilities
365,367
357,080
410,772
TOTAL LIABILITIES
21,056,316
21,102,825
19,538,143
Commitments and contingent liabilities
SHAREHOLDERS’ EQUITY:
Common stock, $0.50 par value; 350,000,000
shares authorized; 158,043,981 and 161,053,983 shares issued and
outstanding as of August 31, 2022 and February 28, 2022,
respectively
79,022
80,527
81,235
Capital in excess of par value
1,684,408
1,677,268
1,653,066
Accumulated other comprehensive income
(loss)
31,999
(46,422
)
(112,343
)
Retained earnings
3,618,798
3,524,066
3,293,221
TOTAL SHAREHOLDERS’ EQUITY
5,414,227
5,235,439
4,915,179
TOTAL LIABILITIES AND SHAREHOLDERS’
EQUITY
$
26,470,543
$
26,338,264
$
24,453,322
CARMAX,
INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended August
31
(In thousands)
2022
2021
OPERATING ACTIVITIES:
Net earnings
$
378,170
$
722,023
Adjustments to reconcile net earnings to
net cash provided by (used in) operating activities:
Depreciation and amortization
137,903
129,300
Share-based compensation expense
47,010
72,780
Provision for loan losses
133,343
11,107
Provision for cancellation reserves
59,208
62,886
Deferred income tax provision
800
32,502
Other
9,713
(19,883
)
Net decrease (increase) in:
Accounts receivable, net
158,532
(244,471
)
Inventory
452,884
(948,299
)
Other current assets
79,188
(26,496
)
Auto loans receivable, net
(804,855
)
(1,177,458
)
Other assets
(31,703
)
(9,745
)
Net (decrease) increase in:
Accounts payable, accrued expenses and
other
current liabilities and accrued income
taxes
(74,986
)
115,542
Other liabilities
(65,618
)
(105,109
)
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES
479,589
(1,385,321
)
INVESTING ACTIVITIES:
Capital expenditures
(204,463
)
(137,838
)
Proceeds from disposal of property and
equipment
84
260
Proceeds from sale of business
—
602
Purchases of investments
(5,428
)
(12,651
)
Sales and returns of investments
2,492
10,954
Business acquisition, net of cash
acquired
—
(241,563
)
NET CASH USED IN INVESTING
ACTIVITIES
(207,315
)
(380,236
)
FINANCING ACTIVITIES:
Increase in short-term debt, net
—
167
Proceeds from issuances of long-term
debt
2,412,900
3,035,601
Payments on long-term debt
(3,057,565
)
(2,168,411
)
Cash paid for debt issuance costs
(10,240
)
(9,547
)
Payments on finance lease obligations
(9,883
)
(5,709
)
Issuances of non-recourse notes
payable
8,230,501
7,414,283
Payments on non-recourse notes payable
(7,576,056
)
(6,201,801
)
Repurchase and retirement of common
stock
(325,168
)
(355,495
)
Equity issuances
13,282
60,087
NET CASH (USED IN) PROVIDED BY
FINANCING ACTIVITIES
(322,229
)
1,769,175
(Decrease) increase in cash, cash
equivalents, and restricted cash
(49,955
)
3,618
Cash, cash equivalents, and restricted
cash at beginning of year
803,618
771,947
CASH, CASH EQUIVALENTS, AND RESTRICTED
CASH AT END OF PERIOD
$
753,663
$
775,565
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220929005157/en/
Investors: David Lowenstein, Assistant Vice President, Investor
Relations investor_relations@carmax.com, (804) 747-0422 x7865
Media: pr@carmax.com, (855) 887-2915
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