CarMax Reports Record First Quarter Results
Releases Second Quarter Expectations
RICHMOND, Va., June 20 -- CarMax, Inc. today reported record results for the fiscal 2004 first quarter ended May 31, 2003.
* Total sales rose 17% to $1.17 billion compared with $1.01 billion in the
fiscal 2003 first quarter ended May 31, 2002.
* Net earnings rose 21% to $35.3 million, or 34 cents per share, compared
with $29.2 million, or 28 cents per share, in last year's first quarter.
-- Excluding $1.9 million, or 2 cents per share, of non-tax-deductible
costs of separation from Circuit City, the prior year's first quarter
earnings were $31.1 million, or 30 cents per share.
* For the second quarter, ending August 31, 2003, CarMax expects
comparable store used unit sales growth in the range of 6% to 8% and
earnings per share in the range of 33 cents to 35 cents.
SALES
Sales Components
(Dollar amounts in millions) Three Months Ended May 31
2003 2002 % Change(2)
Used vehicle sales $890.1 $737.8 21 %
New vehicle sales 136.4 132.3 3 %
Wholesale vehicle sales 100.7 92.5 9 %
Other sales and revenues(1) 45.6 43.2 5 %
Net sales and operating revenues(1) $1,172.8 $1,005.8 17 %
(1) CarMax now classifies finance fees received from third-party lenders in other sales and revenues. Other sales and revenues also include extended warranty revenues, service department sales and appraisal purchase processing fees collected from customers for the purchase of their vehicles. Through the second quarter ended August 31, 2002, third-party finance fees were recorded as a reduction to selling, general and administrative expenses. As a result of this change, other sales and revenues were reclassified for the three month period ended May 31, 2002. Third-party finance fees were $4.8 million in the first quarter of fiscal 2004 compared with $4.2 million in the same period last year.
(2) Percent calculations are based on amounts shown on the following consolidated statements of earnings.
Comparable Store Retail Vehicle Sales Change
Three Months Ended May 31
2003 2002
Vehicle units:
Used vehicles 10 % 12 %
New vehicles 3 % (4)%
Total 9 % 10 %
Vehicle dollars:
Used vehicles 9 % 14 %
New vehicles 3 % (4)%
Total 8 % 11 %
EARNINGS
(Amounts in millions except per share data)
Three Months Ended May 31
2003 2002 %Change
Net earnings $35.3 $29.2 21 %
Separation costs $0.0 $1.9 NM(2)
Earnings excluding separation costs $35.3 $31.1 13 %
Diluted weighted average shares outstanding 104.8 104.8 --
Net earnings per share $0.34 $0.28(1) 21 %
Earnings per share cost of separation $0.00 $0.02 NM(2)
Earnings per share excluding separation costs $0.34 $0.30 13 %
(1) All per share amounts are presented on a fully diluted basis. CarMax was a wholly owned subsidiary of Circuit City Stores, Inc. during the first quarter ended May 31, 2002. Historical earnings per share as previously reported for the CarMax Group included the entire dilutive effect of options and restricted stock applied only to the CarMax Group shares then outstanding. The current CarMax, Inc. consolidated financial statements present earnings per share to reflect the capital structure effective with the separation of CarMax from Circuit City Stores, Inc. Consequently, the options and restricted stock dilutive effect is spread over the larger number of CarMax, Inc. shares outstanding. For the first quarter ended May 31, 2002, previously reported earnings per CarMax Group share were 27 cents.
(2) Not meaningful.
BUSINESS PERFORMANCE REVIEW
Selected Operating Ratios
Three Months Ended May 31
(Dollar amounts in millions) 2003 % 2002 %
Net sales and operating revenues $1,172.8 100.0% $1,005.8 100.0%
Gross profit $ 147.8 12.6% $ 122.1 12.1%
CarMax Auto Finance income $ 25.7 2.2% $ 19.8 2.0%
Selling, general and administrative
expenses $ 115.6 9.9% $ 93.0 9.3%
Separation costs $ 0.0 0.0% $ 1.9 0.2%
Selling, general and administrative
expenses excluding separation costs $ 115.6 9.9% $ 91.1 9.1%
Operating profit (EBIT)* $ 58.0 4.9% $ 48.9 4.9%
Operating profit (EBIT)* excluding
separation costs $ 58.0 4.9% $ 50.8 5.1%
Net earnings $ 35.3 3.0% $ 29.2 2.9%
Net earnings excluding separation
costs $ 35.3 3.0% $ 31.1 3.1%
*Operating profit equals earnings before interest and taxes.
"Strong used unit sales -- both comps and new store -- were the primary reason that our first quarter earnings exceeded our original expectations," said Austin Ligon, president and chief executive officer. "At 10%, used unit comp growth was higher than even the strong 7% to 9% range we had forecast. We continue to improve store execution across our store base.
"Once again, we achieved our target for gross margin dollars per used unit," said Ligon. "We experienced the incremental SG&A expenses we expected. We began to incur higher-level operating expenses associated with being a stand-alone company in last year's third quarter following our separation from Circuit City. Also as anticipated, we saw slightly higher preopening expenses because we opened two stores this quarter compared with one store in last year's first quarter." The company estimated that incremental costs related to being a stand-alone company were roughly $5.5 million in the first quarter.
SECOND QUARTER EXPECTATIONS
"Our sales run rates lead us to anticipate used unit comp growth in the range of 6% to 8% for the second quarter," said Ligon. "We expect, as well, that our costs of funds will remain roughly at first quarter levels, benefiting CarMax Auto Finance. The second quarter will also be the last full quarter in which the additional expenses related to being a stand-alone company are incremental compared to last year. We expect earnings per share for the quarter in the range of 33 cents to 35 cents."
STORE OPENINGS
CarMax entered the Las Vegas market in March and the Kansas City market in April, opening a standard used car superstore in each market. During the second quarter, CarMax plans to enter the Birmingham market with a standard superstore and to add a satellite superstore in Orlando. The company also expects to add 4 or 5 used car superstores during the second half of the fiscal year.
CONFERENCE CALL INFORMATION
CarMax will release first quarter earnings on Friday, June 20, 2003. The company will host a conference call for investors at 10:00 a.m. Eastern time on that date. Domestic investors may access the call at 1-888-298-3261 (conference I.D.: 1141667). International investors should dial 1-706-679-7457 (conference I.D.: 1141667). A live Web cast of the call will be available on the company's investor information home page at http://investor.carmax.com/ or at www.streetevents.com.
A replay of the call will be available beginning at approximately 2:00 p.m. Eastern time on June 20 and will run through midnight, June 26, 2003. Domestic investors may access the recording at 1-800-642-1687 (conference I.D.: 1141667) and international investors at 1-706-645-9291 (conference I.D.: 1141667). A replay of the call also will be available on the company's investor information home page or at www.streetevents.com.
ABOUT CARMAX
CarMax is the nation's leading specialty retailer of used cars. Headquartered in Richmond, Va., CarMax currently operates 42 used car superstores in 20 markets. CarMax also operates 16 new car franchises, 14 of which are integrated or co-located with its used car superstores. During the twelve month period ended May 31, 2003, the company sold 200,900 used cars, which is 90 percent of the total 223,400 the company sold during that period. For more information, access the CarMax Web site at www.carmax.com.
FORWARD-LOOKING STATEMENTS
This release contains forward-looking statements, which are subject to risks and uncertainties that could cause actual results to differ materially from management's projections, forecasts, estimates and expectations. These risk factors are set forth in more detail in the company's SEC filings.
CARMAX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
(Amounts in thousands except per share data)
Three Months Ended May 31
2003 %(1) 2002 %(1)
Sales and operating revenues:
Used vehicle sales $890,142 75.9 $737,781 73.4
New vehicle sales 136,399 11.6 132,343 13.2
Wholesale vehicle sales 100,733 8.6 92,453 9.2
Other sales and revenues 45,561 3.9 43,226 4.3
Net sales and operating
revenues 1,172,835 100.0 1,005,803 100.0
Cost of sales 1,025,064 87.4 883,661 87.9
Gross profit 147,771 12.6 122,142 12.1
CarMax Auto Finance income 25,748 2.2 19,838 2.0
Selling, general and
administrative expenses 115,553 9.9 93,037 9.3
Interest expense 754 0.1 694 0.1
Interest income 122 - 78 -
Earnings before income taxes 57,334 4.9 48,327 4.8
Provision for income taxes 22,074 1.9 19,089 1.9
Net earnings $35,260 3.0 $29,238 2.9
Weighted average common shares:
Basic 103,156 102,885
Diluted 104,762 104,753
Net earnings per share:
Basic $0.34 $0.28
Diluted $0.34 $0.28
(1)Percents of net sales and operating revenues may not total due to rounding.
CARMAX, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
May 31 February 28
2003 2002 2003
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $32,029 $61,445 $34,615
Accounts receivable, net 73,940 52,331 56,449
Automobile loan receivables
held for sale 20,428 2,576 3,579
Retained interests in
securitized receivables 145,020 127,860 135,016
Inventory 430,386 417,461 466,450
Prepaid expenses and other
current assets 8,464 1,646 12,636
Total current assets 710,267 663,319 708,745
Property and equipment, net 218,069 145,572 187,158
Deferred income taxes 3,098 - -
Other assets 20,218 21,327 21,714
TOTAL ASSETS $951,652 $830,218 $917,617
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable $139,824 $91,479 $117,587
Accrued expenses and other
current liabilities 47,125 22,694 44,682
Accrued income taxes 16,136 - -
Deferred income taxes 29,948 21,914 29,783
Short-term debt 14,532 9,761 56,051
Current installments of
long-term debt - 55,324 -
Total current liabilities 247,565 201,172 248,103
Long-term debt, excluding
current installments 100,000 100,000 100,000
Deferred revenue and other
liabilities 11,984 9,186 10,904
Deferred income taxes - 2,444 4,041
TOTAL LIABILITIES 359,549 312,802 363,048
STOCKHOLDERS' EQUITY 592,103 517,416 554,569
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $951,652 $830,218 $917,617
CARMAX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Amounts in thousands)
Three Months Ended May 31
2003 2002
Operating Activities:
Net earnings $35,260 $29,238
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 4,063 4,138
Amortization of restricted stock awards 32 18
Loss on disposition of property and equipment - 10
Provision for deferred income taxes (6,974) (586)
Changes in operating assets and liabilities:
Increase in accounts receivable, net (17,491) (1,890)
Increase in automobile loan receivables
held for sale (16,849) (432)
Increase in retained interests in
securitized receivables (10,004) (7,177)
Decrease (increase) in inventory 36,064 (18,377)
Decrease in prepaid expenses and
other current assets 4,172 419
Decrease (increase) in other assets 1,423 (1)
Increase in accounts payable, accrued
expenses and other current liabilities
and accrued income taxes 41,856 3,012
Increase in deferred revenue and other
liabilities 1,080 770
Net cash provided by operating activities 72,632 9,142
Investing Activities:
Purchases of property and equipment (34,901) (28,533)
Proceeds from sales of property and equipment - 6
Net cash used in investing activities (34,901) (28,527)
Financing Activities:
Decrease in short-term debt, net (41,519) (79)
Issuance of long-term debt - 76,716
Equity issuances, net 1,202 907
Net cash (used in) provided by
financing activities (40,317) 77,544
(Decrease) increase in cash and
cash equivalents (2,586) 58,159
Cash and cash equivalents at beginning of year 34,615 3,286
Cash and cash equivalents at end of period $32,029 $61,445
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