CarMax Group Reports Record Second Quarter Earnings
RICHMOND, Va.--Sept. 19, 2001--This release originally crossed the wire at 7:55 a.m. ET this morning. Due to Business Wire error, the release did not post on the www.businesswire.com web site. The original release follows.
In a separate release, Circuit City Stores, Inc. today reported second quarter results for the company, including record results for the CarMax Group .
Total sales for the CarMax Group were $851.4 million in the second quarter, up 26 percent from $673.6 million in last year's second quarter. Comparable store sales increased 27 percent. Net earnings for the CarMax business rose 68 percent to $27.4 million in this year's second quarter from $16.3 million in the second quarter of last year. Net earnings per CarMax Group share rose 67 percent to 25 cents from 15 cents in last year's second quarter. The net earnings attributed to the CarMax Group stock were $8.0 million, an increase of 95 percent from $4.1 million in last year's second quarter. The remainder of the CarMax Group's net earnings is attributed to the Circuit City Group stock.
For the six months, the CarMax Group's total sales rose 27 percent to $1.65 billion in fiscal 2002 from $1.30 billion in the first six months of last year. Comparable store sales rose 27 percent. Net earnings for the CarMax business increased 79 percent to $54.0 million in the first six months of this year from $30.2 million in the same period last year. Net earnings per CarMax Group share also rose 79 percent to 50 cents in the first half of this year versus 28 cents in last year's first half. The net earnings attributed to the CarMax Group stock were $14.9 million, an increase of 94 percent from $7.7 million in last year's first half.
For the quarter and the six months, net earnings attributed to the CarMax Group stock grew faster than total net earnings and net earnings per CarMax Group share because of the impact of the sale of CarMax Group stock by Circuit City Stores, Inc. during the quarter. Because both the earnings allocation and the outstanding CarMax shares were adjusted to reflect the impact of the sale, net earnings per CarMax Group share were not diluted by the sale.
In the public offering, Circuit City Stores, Inc. sold 9,516,800 CarMax Group shares that had previously been reserved for the Circuit City Group, reducing the Circuit City Group's retained interest in the CarMax Group during the quarter. With the impact of the offering, 70.7 percent of the CarMax Group's second quarter earnings and 72.5 percent of the CarMax Group's first-half earnings were allocated to the Circuit City Group. For the same periods last year, 74.6 percent of the CarMax Group's earnings were allocated to the Circuit City Group. At the end of the second quarter, the Circuit City Group retained a 64.6 percent interest in the CarMax Group shares.
"CarMax delivered consistently strong sales and earnings growth throughout the first half of the fiscal year," said W. Austin Ligon, president of CarMax. "Higher-than-anticipated sales were led by used-car sales growth driven by strong store traffic, better in-store execution and modest increases in average retails.
"The second quarter's 12.7 percent gross profit margin compares with 13.4 percent in the same period last year," said Ligon. "In our used-car business, we target average gross margin dollars per unit. Because we experienced higher average retails in used cars while also achieving our target gross margin dollars, the gross margin declined modestly on a percentage basis. These higher average retails also added to the expense leverage from our sales growth, more than offsetting the decline in gross margin. We also continued in the second quarter to benefit from increased yield spreads from our finance operation resulting from the lower cost of funds. Both these factors contributed to an expense ratio of 7.3 percent compared with 9.1 percent in last year's second quarter." CarMax's second quarter operating margin before interest and taxes rose to 5.4 percent this year from 4.3 percent last year.
Operating Ratios - CarMax Group
Second Quarter Ended Six Months Ended
August 31 August 31
--------- ---------
2001 2000 2001 2000
---- ---- ---- ----
Net Sales and Operating Revenues 100.0% 100.0% 100.0% 100.0%
Gross Profit Margin 12.7% 13.4% 12.9% 13.5%
Expense Ratio 7.3% 9.1% 7.3% 9.3%
Operating Profit Margin 5.4% 4.3% 5.6% 4.2%
For the quarter, the CarMax business produced pretax earnings of $44.2 million, a 68 percent increase from pretax earnings of $26.2 million in last year's second quarter. The pretax profit margin was 5.2 percent this year compared with 3.9 percent in the same period last year.
"We have seen our used-car sales rebound strongly since the events of September 11, but have seen a slowdown in new-car sales," said Ligon. "Because our sales are heavily weighted toward and our profits driven by used-car sales, we are very comfortable with the current analyst consensus estimate of 20 cents per CarMax Group share for the second half of the fiscal year. If used-car sales trends continue as strong as we have seen following September 11, we would expect to outperform those estimates." CarMax previously announced expectations for net earnings of 16 cents to 18 cents per CarMax Group share for the second half of the fiscal year.
Conference Call Information
Circuit City Stores, Inc. will host a conference call for interested investors at 10:00 a.m. Eastern Time today to discuss the release of second quarter results for both the Circuit City Group and the CarMax Group . The conference call will begin with a discussion of the CarMax Group's results, followed by a discussion of the Circuit City Group's results.
Domestic investors may access the call at 1-888-381-5777 (passcode: Circuit City). International investors should dial 1-712-271-0067 (passcode: Circuit City). A live Web cast of the conference call will be available on the CarMax's investor information home page or at www.streetevents.com. To access the investor information home page, log onto http://investor.CarMax.com.
& nbsp; A replay of the call will be available beginning at approximately 12 noon Eastern Time today and will run through midnight, September 24. Domestic investors may access the recording at 1-800-677-0672 and international investors at 1-402-998-1110. No access code is required. A replay of the call also will be available on CarMax's investor information home page by the end of business today.
CarMax is the nation's leading specialty retailer of used cars. With headquarters in Richmond, Va., the company currently operates 40 retail units in 37 locations, including 33 used-car superstores. CarMax also operates 20 new-car franchises, most of which are integrated or co-located with its used-car superstores. For more information, access the CarMax Web site at www.CarMax.com.
CarMax is a subsidiary of Circuit City Stores, Inc. Circuit City Stores, Inc. has two series of common stock, one of which is the CarMax Group stock, which tracks the performance of the CarMax operations, and the other of which is the Circuit City Group stock, which tracks the performance of the Circuit City operations and the retained interest in the CarMax Group. A portion of the earnings of the CarMax Group is attributed to the CarMax Group stock; the balance is attributed to the Circuit City Group stock.
This release contains forward-looking statements, which are subject to risks and uncertainties. Additional discussion of factors that could cause actual results to differ materially from management's projections, forecasts, estimates and expectations is contained in the Circuit City Stores, Inc. SEC filings.
CIRCUIT CITY STORES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited)
PERIODS ENDED AUGUST 31
(Amounts in thousands except per share data)
Three Months Six Months
------------ ----------
2001 2000 2001 2000
---- ---- ---- ----
NET SALES AND OPERATING
REVENUES $ 2,887,915 $ 3,179,781 $ 5,566,389 $ 6,254,632
Cost of sales, buying
and warehousing 2,282,845 2,477,990 4,394,966 4,869,579
Appliance exit costs - 28,326 - 28,326
----------- ----------- ----------- -----------
GROSS PROFIT 605,070 673,465 1,171,423 1,356,727
Selling, general and
administrative expenses 579,465 572,298 1,115,459 1,151,504
Appliance exit costs - 1,670 - 1,670
Interest expense 1,654 3,583 4,646 9,804
----------- ----------- ----------- -----------
EARNINGS BEFORE INCOME
TAXES 23,951 95,914 51,318 193,749
Provision for income
taxes 9,101 36,447 19,501 73,624
----------- ----------- ----------- -----------
NET EARNINGS $ 14,850 $ 59,467 $ 31,817 $ 120,125
=========== =========== =========== ===========
Net earnings attributed to:
Circuit City Group
common stock $ 6,822 $ 55,341 $ 16,957 $ 112,464
=========== =========== =========== ===========
CarMax Group common
stock $ 8,028 $ 4,126 $ 14,860 $ 7,661
=========== =========== =========== ===========
Weighted average common
shares:
Circuit City Group
basic 205,329 203,770 205,229 203,318
=========== =========== =========== ===========
Circuit City Group
diluted 206,924 205,494 206,304 205,686
=========== =========== =========== ===========
CarMax Group basic 29,877 25,550 27,905 25,534
=========== =========== =========== ===========
CarMax Group diluted 32,028 26,956 29,866 26,937
=========== =========== =========== ===========
NET EARNINGS PER SHARE:
Circuit City Group:
Basic $ 0.03 $ 0.27 $ 0.08 $ 0.55
=========== =========== =========== ===========
Diluted $ 0.03 $ 0.27 $ 0.08 $ 0.55
=========== =========== =========== ===========
CarMax Group:
Basic $ 0.27 $ 0.16 $ 0.53 $ 0.30
=========== =========== =========== ===========
Diluted $ 0.25 $ 0.15 $ 0.50 $ 0.28
=========== =========== =========== ===========
CIRCUIT CITY STORES, INC.
CONSOLIDATED BALANCE SHEETS (Unaudited)
(Amounts in thousands)
August 31
---------
2001 2000
-------------- --------------
ASSETS
Current Assets:
Cash and cash equivalents $ 823,654 $ 432,700
Net accounts receivable 600,600 614,540
Inventory 1,560,461 1,846,749
Prepaid expenses and other current
assets 41,692 38,144
-------------- --------------
Total Current Assets 3,026,407 2,932,133
Property and equipment, net 898,222 954,960
Other assets 34,251 46,359
-------------- --------------
TOTAL ASSETS $ 3,958,880 $ 3,933,452
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current installments of long-term
debt $ 102,441 $ 132,318
Accounts payable 947,405 1,017,295
Short-term debt 1,570 2,470
Accrued expenses and other current
liabilities 153,670 164,252
Deferred income taxes 103,017 63,791
-------------- --------------
Total Current Liabilities 1,308,103 1,380,126
Long-term debt, excluding current
installments 15,528 118,393
Deferred revenue and other liabilities 85,880 110,202
Deferred income taxes 11,649 18,689
-------------- --------------
TOTAL LIABILITIES 1,421,160 1,627,410
STOCKHOLDERS' EQUITY 2,537,720 2,306,042
-------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 3,958,880 $ 3,933,452
============== ==============
CARMAX GROUP
STATEMENTS OF EARNINGS (Unaudited)
PERIODS ENDED AUGUST 31
(Amounts in thousands except per share data)
Three Months Six Months
------------ ----------
2001 2000 2001 2000
---- ---- ---- ----
NET SALES AND
OPERATING REVENUES $ 851,363 $ 673,561 $ 1,648,183 $ 1,299,302
Cost of sales 742,837 583,012 1,435,697 1,123,291
--------- --------- ----------- -----------
GROSS PROFIT 108,526 90,549 212,486 176,011
Selling, general and
administrative expenses 62,262 61,348 120,812 120,792
Interest expense 2,086 2,958 4,637 6,486
--------- --------- ----------- -----------
EARNINGS BEFORE INCOME
TAXES 44,178 26,243 87,037 48,733
Provision for income
taxes 16,787 9,972 33,074 18,518
--------- --------- ----------- -----------
NET EARNINGS $ 27,391 $ 16,271 $ 53,963 $ 30,215
========= ========= =========== ===========
Net earnings attributed to:
Circuit City Group
common stock $ 19,363 $ 12,145 $ 39,103 $ 22,554
========= ========= =========== ===========
CarMax Group
common stock $ 8,028 $ 4,126 $ 14,860 $ 7,661
========= ========= =========== ===========
Weighted average common
shares:
Basic 29,877 25,550 27,905 25,534
========= ========= =========== ===========
Diluted 32,028 26,956 29,866 26,937
========= ========= =========== ===========
NET EARNINGS PER SHARE:
Basic $ 0.27 $ 0.16 $ 0.53 $ 0.30
========= ========= =========== ===========
Diluted $ 0.25 $ 0.15 $ 0.50 $ 0.28
========= ========= =========== ===========
CARMAX GROUP
BALANCE SHEETS (Unaudited)
(Amounts in thousands)
August 31
---------
2001 2000
-------------- --------------
ASSETS
Current Assets:
Cash and cash equivalents $ 24,557 $ 6,890
Net accounts receivable 160,624 110,733
Inventory 386,903 287,603
Prepaid expenses and other current
assets 1,958 3,019
-------------- --------------
Total Current Assets 574,042 408,245
Property and equipment, net 96,630 198,794
Other assets 23,781 36,754
-------------- --------------
TOTAL ASSETS $ 694,453 $ 643,793
============== ==============
LIABILITIES AND GROUP EQUITY
Current Liabilities:
Current installments of long-term
debt $ 87,782 $ 80,889
Accounts payable 99,176 76,987
Short-term debt 1,359 1,513
Accrued expenses and other current
liabilities 24,450 20,321
Deferred income taxes 21,351 10,732
-------------- --------------
Total Current Liabilities 234,118 190,442
Long-term debt, excluding current
installments 826 63,761
Deferred revenue and other
liabilities 6,971 7,097
Deferred income taxes 3,527 6,121
-------------- --------------
TOTAL LIABILITIES 245,442 267,421
GROUP EQUITY 449,011 376,372
-------------- --------------
TOTAL LIABILITIES AND GROUP EQUITY $ 694,453 $ 643,793
============== ==============