EX-99.1 2 kmx22916earningsrelease.htm EXHIBIT 99.1 Exhibit











CARMAX REPORTS FOURTH QUARTER AND FISCAL YEAR RESULTS

Richmond, Va., April 7, 2016 – CarMax, Inc. (NYSE:KMX) today reported results for the fourth quarter and fiscal year ended February 29, 2016.

▪
Net sales and operating revenues increased 5.5% to $3.71 billion in the fourth quarter. For the fiscal year, net sales and operating revenues increased 6.2% to $15.15 billion.

▪
Used unit sales in comparable stores increased 0.7% in the fourth quarter and 2.4% in the fiscal year.

▪
Total used unit sales rose 4.0% in the fourth quarter and 6.5% in the fiscal year.

▪
Our data indicates that in our markets, we increased our share of the 0-10 year old used car market by approximately 1% in calendar year 2015.

▪
Total wholesale unit sales increased 2.3% in the fourth quarter and 4.9% in the fiscal year.

▪
CarMax Auto Finance (CAF) income increased 2.2% to $92.3 million in the fourth quarter. For the fiscal year, CAF income rose 6.7% to $392.0 million.

▪
In the fourth quarter, net earnings declined 1.5% to $141.0 million, while net earnings per diluted share rose 6.0% to $0.71. Net earnings for this year’s fourth quarter was reduced by $5.2 million, net of tax, or $0.03 per diluted share, for an impairment-related charge associated with a property that we no longer plan to use. Year-over-year comparisons were affected by (i) a previously reported adjustment to capitalized interest expense recorded in the prior year’s quarter, which increased earnings by $4.2 million, net of tax, or $0.02 per diluted share and (ii) the impairment-related charge recorded in the current year’s quarter.

▪
For the fiscal year, net earnings increased 4.4% to $623.4 million and net earnings per diluted share rose 11.0% to $3.03. Year-over-year comparisons were affected by a previously announced receipt of proceeds in a class action lawsuit in the second quarter of the prior fiscal year, which increased earnings by $12.9 million, net of tax, or $0.06 per diluted share.

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“While we faced a somewhat more challenging sales environment in the second half of the year, we delivered solid revenue and EPS growth in both the fourth quarter and the fiscal year, we opened a record number of stores and we made progress toward optimizing our capital structure by buying back 16.3 million shares in fiscal 2016,” said Tom Folliard, chief executive officer.

Fourth Quarter Business Performance Review

Sales. Total used vehicle unit sales grew 4.0% and comparable store used unit sales rose 0.7% versus the prior year’s fourth quarter. The comparable store used unit sales performance was driven by improved conversion and the solid execution of our store teams.

Wholesale vehicle unit sales grew 2.3% versus the fourth quarter of fiscal 2015, driven by the growth in our store base.
Other sales and revenues declined 8.5% year-over-year primarily reflecting our disposal of new car franchises earlier in the fiscal year. Starting this quarter, new car sales are included as a component of other sales and revenues. Extended protection plan (EPP) revenues increased 4.5%, largely reflecting the growth in our used unit sales. Net third-party finance fees improved by 12.0% primarily due to shifts in the mix among finance providers. Vehicles financed by the Tier 3 providers (those providers to whom we pay a fee) and those included in the CAF Tier 3 loan origination program represented 15.1% of retail unit sales in the current quarter versus 17.0% in the prior year’s fourth quarter.

Gross Profit. Total gross profit increased 2.8% versus last year’s fourth quarter, to $489.3 million. Used vehicle gross profit rose 2.1%, driven by the 4.0% increase in total used unit sales. Used vehicle gross profit per unit declined to $2,109 compared with $2,148 in the corresponding prior year period. Wholesale vehicle gross profit declined 0.7% versus the prior year’s quarter, as the 2.3% increase in wholesale vehicle unit sales was offset by a decrease in wholesale vehicle gross profit per unit to $1,005 from $1,036. Other gross profit rose 11.9%, primarily reflecting the improvements in EPP revenues and net third-party finance fees.

SG&A.(1) Compared with the fourth quarter of fiscal 2015, SG&A expenses increased 1.2% to $333.9 million. The growth primarily reflected the 10% increase in our store base since the beginning of last year’s fourth quarter (representing the addition of 15 stores), largely offset by a $14.2 million decrease in share-based compensation expense. Advertising expense was flat versus the prior year quarter, primarily reflecting a shift in timing of expenditures to earlier quarters of fiscal 2016. SG&A per used unit was $2,151 in the current quarter, down $60 year-over-year. The decrease in share-based compensation expense reduced SG&A per used unit by $97.

CarMax Auto Finance.(2) Compared with last year’s fourth quarter, CAF income rose 2.2% to $92.3 million, driven by an increase in average managed receivables, which was largely offset by a lower total interest margin percentage and an increase in the provision for loan losses. Average managed receivables grew 13.9% to $9.45 billion. The total interest margin, which reflects the spread between interest and fees charged to consumers and our funding costs, declined to 5.9% of average managed receivables from 6.3% in last year’s fourth quarter. The increase in the provision for loan losses reflects the growth in our managed receivables and favorable loss experience in last year’s fourth quarter, which reduced the prior year provision. The allowance for loan losses as a percentage of ending managed receivables remained similar at 0.99% as of February 29, 2016 compared with 0.97% as of February 28, 2015.

(1) 
Starting this quarter, SG&A per unit calculations are based on used units; previously they were based on retail units.
(2) 
Although CAF benefits from certain indirect overhead expenditures, we have not allocated indirect costs to CAF to avoid making subjective allocation decisions.


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In January 2014, CAF launched a test originating loans for customers who typically would be financed by our Tier 3 finance providers.  As of February 29, 2016, a total of $96.5 million in receivables were outstanding related to this program. We plan to continue to originate loans in the Tier 3 space at a share of Tier 3 originations similar to that during the past two years.

Interest Expense. Interest expense rose to $11.8 million in the fourth quarter of fiscal 2016 from $2.2 million in the prior year’s quarter. During the prior year’s quarter, interest expense was reduced by $6.9 million, before tax, representing capitalized interest related to earlier quarters of fiscal 2015. Excluding this adjustment, the year-over-year increase in interest expense primarily reflected our higher average outstanding debt in the current fiscal year.

Other Expense. During the current year’s fourth quarter, we recorded an impairment-related charge of $8.3 million, before tax, associated with a property that we no longer plan to use.

Store Openings. During the fourth quarter, we opened five stores, including three stores in new markets (two in Boston and one in Peoria/Bloomington) and two in existing markets (our sixth store in Atlanta and our third store in St. Louis). In total, we opened 14 stores and relocated 1 store during fiscal 2016, bringing our used car store count to 158 as of February 29, 2016.

Share Repurchase Activity. During the fourth quarter, we repurchased 3.0 million shares of common stock for $155.8 million pursuant to our share repurchase program. For the fiscal year, we repurchased 16.3 million shares at a cost of $971.2 million. As of February 29, 2016, we had $1.40 billion remaining available for repurchase under the program.

Fiscal 2017 Capital Spending Plan

We currently plan to open between 13 and 16 stores in each of the next two fiscal years. In fiscal 2017, we plan to open 15 stores. We currently estimate capital expenditures will total approximately $450 million in fiscal 2017. Compared with fiscal 2016, the increase in planned capital spending primarily reflects the timing of land acquisitions and construction activity.




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Supplemental Financial Information
Amounts and percentage calculations may not total due to rounding.

Sales Components

 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended February 29 or 28
 
Years Ended February 29 or 28
(In millions)
2016
 
2015
 
Change
 
2016
 
2015
 
Change
Used vehicle sales
$
3,087.6

 
$
2,899.5

 
6.5
 %
 
$
12,439.4

 
$
11,674.5

 
6.6
 %
Wholesale vehicle sales
506.1

 
491.9

 
2.9
 %
 
2,188.3

 
2,049.1

 
6.8
 %
Other sales and revenues:
 
 
 
 
 
 
 
 
 
 
 
Extended protection plan revenues
70.4

 
67.3

 
4.5
 %
 
267.8

 
255.7

 
4.7
 %
Third-party finance fees, net
(16.4
)
 
(18.6
)
 
12.0
 %
 
(61.5
)
 
(63.7
)
 
3.5
 %
Other (1)
58.1

 
74.0

 
(21.3
)%
 
315.7

 
353.1

 
(10.6
)%
Total other sales and revenues
112.1

 
122.7

 
(8.5
)%
 
522.0

 
545.1

 
(4.2
)%
Total net sales and operating revenues
$
3,705.8

 
$
3,514.1

 
5.5
 %
 
$
15,149.7

 
$
14,268.7

 
6.2
 %

(1)  
In the fourth quarter of fiscal 2016, we reclassified New Vehicle Sales to Other Sales and Revenue and no longer separately present New Vehicle Sales. New Vehicle Sales represented approximately 1% of total sales. All periods presented have been revised for this new presentation.

Unit Sales

 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended February 29 or 28
 
Years Ended February 29 or 28
 
2016
 
2015
 
Change
 
2016
 
2015
 
Change
Used vehicles
155,237
 
149,271
 
4.0
%
 
619,936
 
582,282
 
6.5
%
Wholesale vehicles
92,219
 
90,111
 
2.3
%
 
394,437
 
376,186
 
4.9
%



Average Selling Prices

 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended February 29 or 28
 
Years Ended February 29 or 28
 
2016
 
2015
 
Change
 
2016
 
2015
 
Change
Used vehicles
$
19,758

 
$
19,297

 
2.4
%
 
$
19,917

 
$
19,897

 
0.1
%
Wholesale vehicles
$
5,267

 
$
5,257

 
0.2
%
 
$
5,327

 
$
5,273

 
1.0
%


Vehicle Sales Changes

 
 
 
 
 
 
 
Three Months Ended February 29 or 28
 
Years Ended
February 29 or 28
 
2016
2015
 
2016
2015
Used vehicle units
4.0
%
12.4
%
 
6.5
%
10.5
%
Used vehicle revenues
6.5
%
12.9
%
 
6.6
%
13.3
%
 
 
 
 
 
 
Wholesale vehicle units
2.3
%
12.3
%
 
4.9
%
9.8
%
Wholesale vehicle revenues
2.9
%
17.0
%
 
6.8
%
12.4
%






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Comparable Store Used Vehicle Sales Changes (1) 

 
 
 
 
 
 
 
Three Months Ended February 29 or 28
 
Years Ended
February 29 or 28
 
2016
2015
 
2016
2015
Used vehicle units
0.7
%
7.0
%
 
2.4
%
4.4
%
Used vehicle revenues
3.0
%
7.6
%
 
2.5
%
7.0
%


(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.


Selected Operating Ratios

 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended February 29 or 28
 
Years Ended February 29 or 28
(In millions)
2016
% (1)
 
2015
% (1)
 
2016
% (1)
 
2015
% (1)
Net sales and operating revenues
$
3,705.8

100.0
 
$
3,514.1

100.0
 
$
15,149.7

100.0
 
$
14,268.7

100.0
Gross profit
$
489.3

13.2
 
$
475.8

13.5
 
$
2,018.8

13.3
 
$
1,887.5

13.2
CarMax Auto Finance income
$
92.3

2.5
 
$
90.4

2.6
 
$
392.0

2.6
 
$
367.3

2.6
Selling, general, and administrative
 
 
 
 
 
 
 
 
 
 
 
expenses
$
333.9

9.0
 
$
330.0

9.4
 
$
1,351.9

8.9
 
$
1,257.7

8.8
Interest expense
$
11.8

0.3
 
$
2.2

0.1
 
$
36.4

0.2
 
$
24.5

0.2
Earnings before income taxes
$
226.2

6.1
 
$
232.8

6.6
 
$
1,009.9

6.7
 
$
969.3

6.8
Net earnings
$
141.0

3.8
 
$
143.1

4.1
 
$
623.4

4.1
 
$
597.4

4.2



(1) 
Calculated as a percentage of net sales and operating revenues.

Gross Profit

 
 
 
 
 
 
 
 
 
 
 
Three Months Ended February 29 or 28
 
Years Ended February 29 or 28
(In millions)
2016
 
2015
Change
 
2016
 
2015
Change
Used vehicle gross profit
$
327.4

 
$
320.7

2.1
 %
 
$
1,338.6

 
$
1,268.5

5.5
%
Wholesale vehicle gross profit
92.7
 
93.3
(0.7
)%
 
388.1
 
364.9
6.4
%
Other gross profit
69.2
 
61.8
11.9
 %
 
292.1
 
254.1
14.9
%
Total
$
489.3

 
$
475.8

2.8
 %
 
$
2,018.8

 
$
1,887.5

7.0
%



Gross Profit per Unit

 
 
 
 
 
 
 
 
 
 
 
Three Months Ended February 29 or 28
 
Years Ended February 29 or 28
 
2016
2015
 
2016
2015
 
$ per unit(1)
%(2)
$ per unit(1)
%(2)
 
$ per unit(1)
%(2)
$ per unit(1)
%(2)
Used vehicle gross profit
$
2,109

10.6
$
2,148

11.1
 
$
2,159

10.8
$
2,179

10.9
Wholesale vehicle gross profit
$
1,005

18.3
$
1,036

19.0
 
$
984

17.7
$
970

17.8
Other gross profit
$
446

61.7
$
414

50.4
 
$
471

55.9
$
436

46.6
Total gross profit
$
3,152

13.2
$
3,188

13.5
 
$
3,256

13.3
$
3,242

13.2



(1) 
Calculated as category gross profit divided by each category’s respective units sold, except the other and total categories, which are calculated by dividing their respective gross profit by used units sold.
(2) 
Calculated as a percentage of its respective sales or revenue.



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SG&A Expenses


 
 
 
 
 
 
 
 
 
 
 
Three Months Ended February 29 or 28
 
Years Ended February 29 or 28
(In millions)
2016
 
2015
Change
 
2016
 
2015
Change
Compensation and benefits (1)
$
178.5

 
$
190.3

(6.2
)%
 
$
737.6

 
$
730.4

1.0
%
Store occupancy costs
71.6
 
63.4
12.9
 %
 
275.6
 
243.5
13.2
%
Advertising expense
34.7
 
34.4
0.9
 %
 
140.6
 
122.8
14.5
%
Other overhead costs (2)
49.1
 
41.9
17.2
 %
 
198.1
 
161.0
23.0
%
Total SG&A expenses
$
333.9

 
$
330.0

1.2
 %
 
$
1,351.9

 
$
1,257.7

7.5
%
SG&A per used unit
$
2,151

 
$
2,211

$
(60
)
 
$
2,181

 
$
2,160

$
21



(1) 
Excludes compensation and benefits related to reconditioning and vehicle repair service, which are included in cost of sales.
(2) 
Includes IT expenses, insurance, non-CAF bad debt, travel, preopening and relocation costs, charitable contributions and other administrative expenses. Costs for the year ended February 28, 2015, were reduced by $20.9 million in connection with the receipt of settlement proceeds in a class action lawsuit.

Components of CAF Income and Other CAF Information

 
 
 
 
 
 
 
 
 
 
 
Three Months Ended February 29 or 28
 
Years Ended February 29 or 28
(In millions)
2016
% (1)
2015
% (1)
 
2016
% (1)
2015
% (1)
Interest margin:
 
 
 
 
 
 
 
 
 
Interest and fee income
$
175.9

7.4

$
154.5

7.4

 
$
682.9

7.5

$
604.9

7.7

Interest expense
(35.8
)
(1.5
)
(24.7
)
(1.2
)
 
(127.7
)
(1.4
)
(96.6
)
(1.2
)
Total interest margin
140.1

5.9

129.8

6.3

 
555.2

6.1

508.3

6.5

Provision for loan losses
(31.0
)
(1.3
)
(22.1
)
(1.1
)
 
(101.2
)
(1.1
)
(82.3
)
(1.0
)
Total interest margin after
 
 
 
 
 
 
 
 
 
provision for loan losses
109.1

4.6

107.7

5.2

 
454.0

5.0

426.0

5.4

 
 
 
 
 
 
 
 
 
 
Total other expense
—

—

—

—

 
(0.4
)
—

—

—

 
 
 
 
 
 
 
 
 
 
Total direct expenses
(16.8
)
(0.7
)
(17.3
)
(0.8
)
 
(61.6
)
(0.7
)
(58.7
)
(0.7
)
CarMax Auto Finance income
$
92.3

3.9

$
90.4

4.4

 
$
392.0

4.3

$
367.3

4.7

 
 
 
 
 
 
 
 
 
 
Total average managed receivables
$
9,451.8

 
$
8,298.8

 
 
$
9,092.9

 
$
7,859.9

 
Net loans originated
$
1,258.9

 
$
1,173.5

 
 
$
5,171.0

 
$
4,727.8

 
Net CAF penetration rate
41.7
%
 
40.9
%
 
 
42.3
%
 
41.2
%
 
Weighted average contract rate
7.5
%
 
7.2
%
 
 
7.3
%
 
7.1
%
 
 
 
 
 
 
 
 
 
 
 
Ending allowance for loan losses
$
94.9

 
$
81.7

 
 
$
94.9

 
$
81.7

 
 
 
 
 
 
 
 
 
 
 
Warehouse facility information:
 
 
 
 
 
 
 
 
 
Ending funded receivables
$
1,399.0

 
$
986.0

 
 
$
1,399.0

 
$
986.0

 
Ending unused capacity
$
1,101.0

 
$
1,314.0

 
 
$
1,101.0

 
$
1,314.0

 
 
 
 
 
 
 
 
 
 
 


(1) 
Percentage of total average managed receivables (quarterly amounts are annualized).






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Earnings Highlights

 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended February 29 or 28
 
Years Ended February 29 or 28
(In millions except per share data)
2016
 
2015
 
Change
 
2016
 
2015
 
Change
Net earnings
$
141.0

 
$
143.1

 
(1.5
)%
 
$
623.4

 
$
597.4

 
4.4
 %
Diluted weighted average shares outstanding
197.4
 
212.9
 
(7.3
)%
 
205.5
 
218.7
 
(6.0
)%
Net earnings per diluted share
$
0.71

 
$
0.67

 
6.0
 %
 
$
3.03

 
$
2.73

 
11.0
 %


Planned Store Openings

We currently plan to open the following 15 stores in fiscal 2017:

 
 
 
 
 
 
 
 
Location
Television Market
Market Status
Planned Opening Date
Springfield, Illinois
Champaign/Springfield
New
Q1 Fiscal 2017
Pleasanton, California
San Francisco
New
Q1 Fiscal 2017
El Paso, Texas
El Paso
New
Q2 Fiscal 2017
Westborough, Massachusetts
Boston
Existing
Q2 Fiscal 2017
Bristol, Tennessee
Tri-Cities TN/VA
New
Q2 Fiscal 2017
Meridian, Idaho
Boise
New
Q3 Fiscal 2017
Maple Shade, New Jersey
Philadelphia
Existing
Q3 Fiscal 2017
Daytona Beach, Florida
Orlando/Daytona Beach
Existing
Q3 Fiscal 2017
Kentwood, Michigan
Grand Rapids/Kalamazoo
New
Q3 Fiscal 2017
Fremont, California
San Francisco
Existing
Q3 Fiscal 2017
Santa Rosa, California
San Francisco
Existing
Q3 Fiscal 2017
South Portland, Maine
Portland/Auburn
New
Q3 Fiscal 2017
Palmdale, California
Los Angeles
Existing
Q4 Fiscal 2017
Murrieta, California
Los Angeles
Existing
Q4 Fiscal 2017
Albany, New York
Albany
New
Q4 Fiscal 2017

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, April 7, 2016. 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 24692282. 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 June 20, 2016. A telephone replay also will be available through April 14, 2016, 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 24692282.





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First Quarter Fiscal 2017 Earnings Release Date

We currently plan to release results for the first quarter ending May 31, 2016, on Tuesday, June 21, 2016, 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 June 2016.

About CarMax

CarMax, a member of the Fortune 500 and the S&P 500, and on the Fortune 100 Best Companies to Work For® list for 12 consecutive years, is the nation’s largest retailer of used vehicles. Headquartered in Richmond, Va., CarMax currently operates 158 used car stores in 78 markets. The CarMax consumer offer features low, no-haggle prices, a broad selection of CarMax Quality Certified used vehicles and superior customer service. During the fiscal year ended February 29, 2016, the company retailed 619,936 used vehicles and sold 394,437 wholesale vehicles at our in-store auctions. For more information, access the CarMax website at www.carmax.com.

Forward-Looking Statements

We caution readers that the statements contained in this release about our future business plans, operations, opportunities or prospects, including without limitation any statements or factors regarding expected sales, margins, expenses, capital expenditures 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 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 the availability or cost of capital and working capital financing, including changes related to the asset-backed securitization market.
•
Changes in consumer credit availability provided by our third-party financing providers.
•
Changes in the availability of extended protection plan products from third-party providers.
•
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 or associate information.
•
Significant changes in prices of new and used vehicles.
•
A reduction in the availability of or access to sources of inventory or a failure to expeditiously liquidate inventory.
•
Factors related to the regulatory and legislative environment in which we operate.
•
Factors related to geographic growth, including the inability to acquire or lease suitable real estate at favorable terms or to effectively manage our growth.
•
The failure of key information systems.
•
The effect of various litigation matters.
•
Adverse conditions affecting one or more automotive manufacturers, and manufacturer recalls.

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•
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.
•
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, 2015, 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.
Contacts:

Investors:    
Katharine Kenny, Vice President, Investor Relations, (804) 935-4591
Celeste Gunter, Manager, Investor Relations, (804) 935-4597

Media:
pr@carmax.com, (855) 887-2915


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CARMAX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)





 
 
 
 
 
 
 
 
 
 
 
Three Months Ended February 29 or 28
 
Years Ended February 29 or 28
(In thousands except per share data)
2016
% (1)
2015
% (1)
 
2016
% (1)
2015
% (1)
SALES AND OPERATING REVENUES:
 
 
 
 
 
 
 
 
 
Used vehicle sales
$
3,087,560

83.3
$
2,899,499

82.5
 
$
12,439,401

82.1
$
11,674,520

81.8
Wholesale vehicle sales
506,072

13.7
491,942

14.0
 
2,188,267

14.4
2,049,133

14.4
Other sales and revenues
112,173

3.0
122,651

3.5
 
522,007

3.4
545,063

3.8
NET SALES AND OPERATING REVENUES
3,705,805

100.0
3,514,092

100.0
 
15,149,675

100.0
14,268,716

100.0
Cost of sales
3,216,540

86.8
3,038,255

86.5
 
13,130,915

86.7
12,381,189

86.8
GROSS PROFIT
489,265

13.2
475,837

13.5
 
2,018,760

13.3
1,887,527

13.2
CARMAX AUTO FINANCE INCOME
92,333

2.5
90,383

2.6
 
392,036

2.6
367,294

2.6
Selling, general and administrative expenses
333,860

9.0
330,009

9.4
 
1,351,935

8.9
1,257,725

8.8
Interest expense
11,784

0.3
2,184

0.1
 
36,358

0.2
24,473

0.2
Other expense
9,768

0.3
1,196

—
 
12,559

0.1
3,292

—
Earnings before income taxes
226,186

6.1
232,831

6.6
 
1,009,944

6.7
969,331

6.8
Income tax provision
85,159

2.3
89,693

2.6
 
386,516

2.6
371,973

2.6
NET EARNINGS
$
141,027

3.8
$
143,138

4.1
 
$
623,428

4.1
$
597,358

4.2
WEIGHTED AVERAGE COMMON SHARES:
 
 
 
 
 
 
 
 
 
Basic
195,764
 
209,655
 
 
203,275
 
215,617
 
Diluted
197,383
 
212,899
 
 
205,540
 
218,691
 
NET EARNINGS PER SHARE:
 
 
 
 
 
 
 
 
 
Basic
$
0.72

 
$
0.68

 
 
$
3.07

 
$
2.77

 
Diluted
$
0.71

 
$
0.67

 
 
$
3.03

 
$
2.73

 

(1)    Percents are calculated as a percentage of net sales and operating revenues and may not equal totals due to rounding.


-more-



CARMAX, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)


 
 
 
 
 
 
 
February 29
 
February 28
(In thousands except share data)
2016
 
2015
ASSETS
 
 
 
 
CURRENT ASSETS:
 
 
 
 
Cash and cash equivalents
$
37,394

 
$
27,606

 
Restricted cash from collections on auto loan receivables
343,829

 
294,122

 
Accounts receivable, net
132,171

 
137,690

 
Inventory
1,932,029

 
2,086,874

 
Other current assets
26,358

 
44,646

 
TOTAL CURRENT ASSETS
2,471,781

 
2,590,938

 
Auto loan receivables, net
9,536,892

 
8,435,504

 
Property and equipment, net
2,161,698

 
1,862,538

 
Deferred income taxes
161,862

 
175,738

 
Other assets
149,343

 
133,483

 
TOTAL ASSETS
$
14,481,576

 
$
13,198,201

 
 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
CURRENT LIABILITIES:
 
 
 
 
Accounts payable
$
441,746

 
$
454,810

 
Accrued expenses and other current liabilities
245,909

 
250,307

 
Accrued income taxes
2,029

 
1,554

 
Short-term debt
428

 
785

 
Current portion of long-term debt
—

 
10,000

 
Current portion of finance and capital lease obligations
14,331

 
21,554

 
Current portion of non-recourse notes payable
300,750

 
258,163

 
TOTAL CURRENT LIABILITIES
1,005,193

 
997,173

 
Long-term debt, excluding current portion
715,000

 
300,000

 
Finance and capital lease obligations, excluding current portion
400,323

 
306,284

 
Non-recourse notes payable, excluding current portion
9,227,000

 
8,212,466

 
Other liabilities
229,274

 
225,493

 
TOTAL LIABILITIES
11,576,790

 
10,041,416

 
 
 
 
 
 
Commitments and contingent liabilities

 

 
SHAREHOLDERS’ EQUITY:
 
 
 
 
Common stock, $0.50 par value; 350,000,000 shares authorized; 194,712,234 and 208,869,688 shares issued and outstanding as of February 29, 2016 and February 28, 2015, respectively
97,356

 
104,435

 
Capital in excess of par value
1,130,822

 
1,123,520

 
Accumulated other comprehensive loss
(70,196
)
 
(65,391
)
 
Retained earnings
1,746,804

 
1,994,221

 
TOTAL SHAREHOLDERS’ EQUITY
2,904,786

 
3,156,785

 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
$
14,481,576

 
$
13,198,201



-more-


CARMAX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
Years Ended February 29 or 28
(In thousands)
2016
 
2015
OPERATING ACTIVITIES:
 
 
 
Net earnings
$
623,428

 
$
597,358

Adjustments to reconcile net earnings to net cash
 
 
 
used in operating activities:
 
 
 
Depreciation and amortization
137,360

 
115,173

Share-based compensation expense
51,077

 
81,880

Provision for loan losses
101,199

 
82,343

Provision for cancellation reserves
77,118

 
70,987

Deferred income tax provision (benefit)
17,237

 
(4,299
)
Loss on disposition of assets and other
13,136

 
3,852

Net decrease (increase) in:
 
 
 
Accounts receivable, net
5,519

 
(57,767
)
Inventory
154,845

 
(445,450
)
Other current assets
15,229

 
(16,947
)
Auto loan receivables, net
(1,202,587
)
 
(1,369,999
)
Other assets
(160
)
 
825

Net (decrease) increase in:
 
 
 
Accounts payable, accrued expenses and other current
 
 
 
liabilities and accrued income taxes
(55,187
)
 
51,960

Other liabilities
(87,107
)
 
(78,046
)
NET CASH USED IN OPERATING ACTIVITIES
(148,893
)
 
(968,130
)
INVESTING ACTIVITIES:
 
 
 
Capital expenditures
(315,584
)
 
(309,817
)
Proceeds from sales of assets
1,542

 
5,869

Increase in restricted cash from collections on auto loan receivables
(49,707
)
 
(34,823
)
Increase in restricted cash in reserve accounts
(12,264
)
 
(16,556
)
Release of restricted cash from reserve accounts
8,357

 
6,346

Purchases of money market securities, net
(6,168
)
 
(8,604
)
Purchases of trading securities
(5,295
)
 
(3,814
)
Sales of trading securities
324

 
655

NET CASH USED IN INVESTING ACTIVITIES
(378,795
)
 
(360,744
)
FINANCING ACTIVITIES:
 
 
 
(Decrease) increase in short-term debt, net
(357
)
 
203

Proceeds from issuances of long-term debt
2,057,100

 
985,000

Payments on long-term debt
(1,652,100
)
 
(675,000
)
Cash paid for debt issuance costs
(3,104
)
 
(1,190
)
Payments on finance and capital lease obligations
(16,417
)
 
(18,243
)
Issuances of non-recourse notes payable
9,553,805

 
7,783,000

Payments on non-recourse notes payable
(8,496,684
)
 
(6,560,815
)
Repurchase and retirement of common stock
(983,941
)
 
(924,328
)
Equity issuances
47,038

 
89,810

Excess tax benefits from share-based payment arrangements
32,136

 
50,142

NET CASH PROVIDED BY FINANCING ACTIVITIES
537,476

 
728,579

Increase (decrease) in cash and cash equivalents
9,788

 
(600,295
)
Cash and cash equivalents at beginning of year
27,606

 
627,901

CASH AND CASH EQUIVALENTS AT END OF YEAR
$
37,394

 
$
27,606


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