CARMAX INC - FORM 8-K - EX-99.1 - PRESS RELEASE

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8-K - FORM 8-K - CARMAX INC	d329970d8k.htm

Exhibit 99.1

LOGO

CARMAX REPORTS RECORD FOURTH QUARTER

AND FISCAL YEAR RESULTS

Richmond, Va., April 5, 2012 – CarMax, Inc. (NYSE:KMX) today reported record results for the fourth quarter and fiscal year ended February 29, 2012.

•

Net sales and operating revenues increased 10% to $2.48 billion from $2.25 billion in the fourth quarter of last year. For the fiscal year, net sales and operating revenues increased 11% to $10.00 billion from $8.98 billion in fiscal 2011.

•

Comparable store used unit sales increased 4% in the fourth quarter and 1% in the fiscal year.

•

Total used unit sales rose 6% in the fourth quarter and 3% in the fiscal year.

•

Total wholesale unit sales increased 13% in the fourth quarter and 20% in the fiscal year.

•

CarMax Auto Finance (CAF) income rose 22% to $66.1 million in the fourth quarter. For the fiscal year, CAF income rose 19% to $262.2 million.

•

Fourth quarter net earnings increased 7% to $95.0 million, or $0.41 per diluted share, compared with $88.8 million, or $0.39 per diluted share, in the prior year quarter.

•

Fiscal 2012 net earnings increased 10% to $413.8 million, or $1.79 per diluted share, compared with $377.5 million, or $1.65 per diluted share, in fiscal 2011.

“We are pleased to report strong fourth quarter and full year results,” said Tom Folliard, president and chief executive officer. “We hit some major milestones this year, including total revenues of $10 billion and annual used retail vehicle sales in excess of 400,000 units, and we look forward to continued growth as we expand our store base in the coming years.”

Fourth Quarter Business Performance Review

Sales. Comparable store used unit sales grew 4% compared with a 12% increase in last year’s fourth quarter. Used unit sales benefited from strong subprime-financed sales, as well as an extra day in the current year quarter due to leap year.

For the fiscal year, our data indicates that we increased our share of the late-model (0-to 6-year old) used vehicle market by approximately 3%. We remain confident that the strength of our consumer offer and the skill of our associates, combined with our resumption of store growth, will continue to drive future share gains.

LOGO

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Wholesale unit sales increased 13% compared with the fourth quarter of fiscal 2011. Similar to the last several quarters, our wholesale volumes benefited from a strong increase in appraisal traffic and a solid buy percentage. We believe appraisal traffic is benefiting from the increase in industry new car sales.

Other sales and revenues declined 12% compared with the prior year’s fourth quarter. The decrease was primarily due to a reduction in third-party finance fees, which resulted from a mix change among third-party finance providers. Subprime providers, who generally purchase subprime financings at a discount, originated 15% of used vehicle sales in the current year’s quarter compared with 9% in the prior year’s fourth quarter. At the same time, as CAF has continued to retain an increased portion of the loans that had been purchased by third-party providers, the fees received from these third parties have declined.

Gross Profit. Total gross profit increased 5% to $338.2 million from $320.7 million in the fourth quarter of fiscal 2011, reflecting a higher gross profit contribution from retail and wholesale vehicles, partly offset by a reduction in other gross profit.

Used vehicle gross profit increased 8% to $225.8 million from $209.5 million in the prior year period. The improvement resulted from the combination of the 6% increase in used units and a 2% increase in gross profit per unit, to $2,135 from $2,096 in the prior year quarter. Last year, we reported that our efforts to eliminate waste from our used vehicle reconditioning processes in recent years had allowed us to achieve a cumulative, sustainable reduction in average reconditioning costs of approximately $250 per vehicle. Adjusting for an increase in the average age of vehicles reconditioned and sold, we continued to realize $250 per unit in savings in fiscal 2012.

Wholesale gross profit increased 13% to $70.2 million compared with $62.4 million in the fourth quarter of the prior year, which was driven by the 13% increase in wholesale unit sales. Wholesale gross profit per unit of $950 was similar to the $956 in the prior year quarter. The strength of our wholesale gross profit per unit continued to be fueled by the strong demand and pricing at our auctions.

Other gross profit declined 14% to $40.8 million from $47.6 million in the prior year period. The decrease was similar to the decline in other sales and revenues and was primarily due to the change in third-party finance fees.

CarMax Auto Finance. CAF income increased 22% to $66.1 million compared with $54.1 million in last year’s fourth quarter, primarily due to an increase in interest margin, which rose to $88.9 million from $74.6 million. The growth in interest margin was driven by increases in both average managed receivables and the spread between the interest charged to consumers and our related funding costs.

CAF net loans originated increased 36% compared with the prior year quarter. The increase reflected our previously reported decision to retain an increased portion of the loans that third-party providers had been purchasing. As of January 2012, CAF had transitioned back to retaining all of these loans. The provision for loan losses was 0.9% of average receivables in both the current year and prior year quarter, as favorable loss experience in fiscal 2012 largely offset the cumulative effect of the origination and retention of loans with greater credit risk.

SG&A. Selling, general and administrative expenses increased 7% to $243.5 million from $226.9 million in the prior year’s fourth quarter. The increase in SG&A expenses reflected the expansion of our store base, increases in sales commissions and other variable costs, and higher growth-related costs, partly offset by lower advertising expense. Growth-related costs include store pre-opening expenses, relocation expenses and costs of maintaining management bench strength to support future growth. SG&A per used unit increased slightly, to $2,302 versus $2,270 in the prior year’s quarter. The SG&A ratio improved to 9.8% compared with 10.1% in the prior year quarter, reflecting the leverage associated with the increases in used and wholesale vehicle sales, and average selling prices.

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Superstore Openings. During the fourth quarter of fiscal 2012, we entered the Chattanooga, Tennessee market. Subsequent to the end of the fiscal year, we opened a store in Lancaster, Pennsylvania.

Supplemental Financial Information

Sales Components


(In millions)	Three Months Ended February 29 or 28 ⁽¹⁾									Fiscal Year Ended February 29 or 28 ⁽¹⁾
	2012			2011			Change			2012			2011			Change
Used vehicle sales	$	1,973.7		$	1,799.9			9.7	%	$	7,826.9		$	7,210.0			8.6	%
New vehicle sales		45.8			48.9			(6.3	)%		200.6			198.5			1.0	%
Wholesale vehicle sales		395.7			335.2			18.1	%		1,721.6			1,301.7			32.3	%
Other sales and revenues:
Extended service plan revenues		48.6			47.3			2.7	%		179.6			173.8			3.3	%
Service department sales		24.0			23.3			3.0	%		98.6			100.6			(2.0	)%
Third-party finance fees, net		(12.0	)		(1.9	)		(520.4	)%		(23.8	)		(9.1	)		(160.1	)%

Total other sales and revenues		60.6			68.6			(11.7	)%		254.5			265.3			(4.1	)%

Net sales and operating revenues	$	2,475.8		$	2,252.6			9.9	%	$	10,003.6		$	8,975.6			11.5	%

⁽¹⁾

Percent calculations and amounts shown are based on amounts presented on the attached consolidated statements of earnings and may not sum due to rounding.

Retail Vehicle Sales Changes


	Three Months Ended February 29 or 28						Fiscal Year Ended February 29 or 28
	2012			2011			2012			2011
Comparable store vehicle sales:
Used vehicle units		4	%		12	%		1	%		10	%
New vehicle units		(2	)%		30	%		1	%		5	%
Total units		4	%		13	%		1	%		10	%

Used vehicle dollars		7	%		16	%		7	%		15	%
New vehicle dollars		4	%		37	%		9	%		7	%
Total dollars		7	%		17	%		7	%		15	%

Total vehicle sales:
Used vehicle units		6	%		14	%		3	%		11	%
New vehicle units		(12	)%		27	%		(7	)%		5	%
Total units		5	%		14	%		3	%		11	%

Used vehicle dollars		10	%		18	%		9	%		16	%
New vehicle dollars		(6	)%		34	%		1	%		6	%
Total dollars		9	%		18	%		8	%		16	%

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CarMax, Inc.

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Unit Sales


	Three Months Ended February 29 or 28				Fiscal Year Ended February 29 or 28
	2012		2011		2012		2011
Used vehicles		105,769		99,969		408,080		396,181
New vehicles		1,727		1,953		7,679		8,231
Wholesale vehicles		73,897		65,229		316,649		263,061

Average Selling Prices


	Three Months Ended February 29 or 28				Fiscal Year Ended February 29 or 28
	2012		2011		2012		2011
Used vehicles	$	18,495	$	17,862	$	18,995	$	18,019
New vehicles	$	26,409	$	24,911	$	25,986	$	23,989
Wholesale vehicles	$	5,208	$	5,004	$	5,291	$	4,816

Selected Operating Ratios


(In millions)	Three Months Ended February 29 or 28										Fiscal Year Ended February 29 or 28
	2012		% ⁽¹⁾			2011		% ⁽¹⁾			2012		% ⁽¹⁾			2011		% ⁽¹⁾

Net sales and operating revenues	$	2,475.8		100.0	%	$	2,252.6		100.0	%	$	10,003.6		100.0	%	$	8,975.6		100.0	%
Gross profit	$	338.2		13.7	%	$	320.7		14.2	%	$	1,378.8		13.8	%	$	1,301.2		14.5	%
CarMax Auto Finance income	$	66.1		2.7	%	$	54.1		2.4	%	$	262.2		2.6	%	$	220.0		2.5	%
Selling, general, and administrative expenses	$	243.5		9.8	%	$	226.9		10.1	%	$	940.8		9.4	%	$	878.8		9.8	%
Interest expense	$	8.4		0.3	%	$	8.6		0.4	%	$	33.7		0.3	%	$	34.7		0.4	%
Earnings before income taxes	$	152.8		6.2	%	$	139.4		6.2	%	$	666.9		6.7	%	$	608.2		6.8	%
Net earnings	$	95.0		3.8	%	$	88.8		3.9	%	$	413.8		4.1	%	$	377.5		4.2	%

⁽¹⁾

Calculated as the ratio of the applicable amount to net sales and operating revenues.

Gross Profit


(In millions)	Three Months Ended February 29 or 28							Fiscal Year Ended February 29 or 28
	2012		2011		Change			2012		2011		Change
Used vehicle gross profit	$	225.8	$	209.5		7.8	%	$	888.6	$	854.0		4.0	%
New vehicle gross profit		1.4		1.1		19.8	%		6.5		5.4		19.9	%
Wholesale vehicle gross profit		70.2		62.4		12.6	%		301.8		238.8		26.4	%
Other gross profit		40.8		47.6		(14.4	)%		181.9		203.0		(10.4	)%

Total gross profit	$	338.2	$	320.7		5.5	%	$	1,378.8	$	1,301.2		6.0	%

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Gross Profit per Unit


	Three Months Ended February 29 or 28										Fiscal Year Ended February 29 or 28
	2012					2011					2012					2011
	$/unit⁽¹⁾		% ⁽²⁾			$/unit⁽¹⁾		% ⁽²⁾			$/unit⁽¹⁾		% ⁽²⁾			$/unit⁽¹⁾		% ⁽²⁾
Used vehicle gross profit	$	2,135		11.4	%	$	2,096		11.6	%	$	2,177		11.4	%	$	2,156		11.8	%
New vehicle gross profit	$	784		3.0	%	$	578		2.3	%	$	847		3.2	%	$	659		2.7	%
Wholesale vehicle gross profit	$	950		17.7	%	$	956		18.6	%	$	953		17.5	%	$	908		18.3	%
Other gross profit	$	379		67.3	%	$	467		69.4	%	$	438		71.5	%	$	502		76.5	%
Total gross profit	$	3,146		13.7	%	$	3,146		14.2	%	$	3,316		13.8	%	$	3,218		14.5	%

⁽¹⁾

Calculated as category gross profit divided by its respective units sold, except the other and total categories, which are divided by total retail units sold.

⁽²⁾

Calculated as a percentage of its respective sales or revenue.

Components of CAF Income and Other CAF Information


(In millions)	Three Months Ended February 29 or 28												Fiscal Year Ended February 29 or 28
	2012						2011						2012						2011
	$			% ⁽¹⁾			$			% ⁽¹⁾			$			% ⁽¹⁾			$			% ⁽¹⁾
Interest and fee income	$	114.7			9.4		$	104.9			9.7		$	448.7			9.6		$	419.1			9.9
Interest expense		(25.8	)		(2.1	)		(30.3	)		(2.8	)		(106.1	)		(2.3	)		(133.8	)		(3.2	)

Interest margin		88.9			7.3			74.6			6.9			342.6			7.3			285.3			6.7
Provision for loan losses		(11.5	)		(0.9	)		(9.3	)		(0.9	)		(36.4	)		(0.8	)		(27.7	)		(0.7	)

Interest margin after provision for loan losses		77.4			6.3			65.3			6.1			306.2			6.6			257.6			6.1
Other gain⁽²⁾		0.1			—			0.7			0.1			1.5			—			7.5			0.2
Direct CAF expenses		(11.4	)		(0.9	)		(11.9	)		(1.1	)		(45.5	)		(1.0	)		(45.1	)		(1.1	)

CarMax Auto Finance income	$	66.1			5.4		$	54.1			5.0		$	262.2			5.6		$	220.0			5.2


Total average managed receivables⁽³⁾	$	4,894.4					$	4,305.9					$	4,662.4					$	4,229.9
Net loans originated	$	717.7					$	527.1					$	2,842.9					$	2,147.4

Ending allowance for loan losses	$	43.3					$	38.9					$	43.3					$	38.9

Warehouse facility information:
Ending funded receivables	$	553.0					$	943.0					$	553.0					$	943.0
Ending unused capacity	$	1,047.0					$	657.0					$	1,047.0					$	657.0

⁽¹⁾

Annualized percent of total average managed receivables.

⁽²⁾

The amount for the fiscal year ended February 28, 2011, includes $2.5 million of servicing fee income and interest income on retained interest in securitized receivables that previously was reported separately.

⁽³⁾

Principal balance only.

Earnings Highlights


(In millions except per share data)	Three Months Ended February 29 or 28							Fiscal Year Ended February 29 or 28
	2012		2011		Change			2012		2011		Change
Net earnings	$	95.0	$	88.8		7.1	%	$	413.8	$	377.5		9.6	%
Diluted weighted average shares outstanding		231.3		229.7		0.7	%		230.7		227.6		1.4	%
Net earnings per share	$	0.41	$	0.39		5.1	%	$	1.79	$	1.65		8.5	%

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CarMax, Inc.

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Store Opening Plan

We currently plan to open the following ten superstores during the fiscal year ending February 28, 2013:


Location	Television Market	Market Status	Planned Opening Date
Lancaster, Pennsylvania⁽¹⁾	Harrisburg	New	Q1 Fiscal 2013
Bakersfield, California	Bakersfield	New	Q1 Fiscal 2013
Nashville, Tennessee	Nashville	Existing	Q2 Fiscal 2013
Fort Myers, Florida	Fort Myers	New	Q2 Fiscal 2013
Naples, Florida	Fort Myers	New	Q2 Fiscal 2013
Oxnard, California	Los Angeles	Existing	Q3 Fiscal 2013
Des Moines, Iowa	Des Moines	New	Q3 Fiscal 2013
Denver, Colorado (2 stores)	Denver	New	Q3 Fiscal 2013
Jacksonville, Florida	Jacksonville	Existing	Q4 Fiscal 2013

⁽¹⁾

Opened in March 2012.

Normal construction, permitting or other scheduling delays could shift the opening dates of any of these stores into a later period. We expect to open between 10 and 15 superstores during each of the three fiscal years following fiscal 2013.

We currently estimate capital expenditures will total approximately $280 million in fiscal 2013.

Lease Accounting Revisions

We have revised our previously issued consolidated financial statements to correct our accounting for sale-leasebacks entered into between 1995 and 2009. As a result of the revision, we have recorded certain properties subject to the sale-leasebacks as assets and the related sale proceeds as financing liabilities. Depreciation is being recognized on the assets. Payments on the leases are now recognized as interest expense and a reduction in the financing liabilities, rather than being recognized as rent expense. We have determined that our financial statements were not materially affected by the revision. As a result of the correction, reported net earnings per diluted share were reduced by $0.02 in both fiscal 2012 and fiscal 2011.

More detailed information will be provided in the annual consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended February 29, 2012. In addition, for the convenience of investors, a summary of our revised consolidated statements of earnings for each of the interim quarters in the fiscal years ended February 29, 2012, and February 28, 2011, is included in this release.

Conference Call Information

We will host a conference call for investors at 9:00 a.m. ET today, April 5, 2012. 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 89939336. A live webcast of the call will be available on our investor information home page at investor.carmax.com and at www.streetevents.com.

A webcast replay of the call will be available at investor.carmax.com beginning at approximately 1:00 p.m. ET on April 5, 2012, through June 20, 2012. A telephone replay also will be available through April 13, 2012, 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 89939336.

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CarMax, Inc.

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First Quarter Fiscal 2013 Earnings Release Date

We currently plan to release first quarter fiscal 2013 sales and earnings on Thursday, June 21, 2012, before the opening of the New York Stock Exchange. We will 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 investor.carmax.com in early June 2012.

About CarMax

CarMax, a member of the Fortune 500 and the S&P 500, and one of the Fortune 2012 “100 Best Companies to Work For,” is the nation’s largest retailer of used cars. Headquartered in Richmond, Va., CarMax currently operates 109 used car superstores in 54 markets. The CarMax consumer offer is structured around four customer benefits: low, no-haggle prices; a broad selection; high quality vehicles; and customer-friendly service. During the twelve months ended February 29, 2012, the company retailed 408,080 used cars and sold 316,649 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 or earnings, are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. 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:

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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 related to our third-party financing providers.

•

Changes in the competitive landscape within our industry.

•

Significant changes in retail prices for used and new vehicles.

•

A reduction in the availability of or access to sources of inventory.

•

Factors related to the regulatory and legislative environment in which we operate.

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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 loss of key employees from our store, regional or corporate management teams.

•

The failure of key information systems.

•

The effect of new accounting requirements or changes to U.S. generally accepted accounting principles.

•

Security breaches or other events that result in the misappropriation, loss or other unauthorized disclosure of confidential customer information.

•

The effect of various litigation matters.

•

Adverse conditions affecting one or more automotive manufacturers.

•

The occurrence of severe weather events.

•

Factors related to the seasonal fluctuations in our business.

•

Factors related to the geographic concentration of our superstores.

•

The occurrence of certain other material events.

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CarMax, Inc.

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For more details on factors that could affect expectations, see our Annual Report on Form 10-K for the fiscal year ended February 28, 2011, and our quarterly or current reports as filed with or furnished to the Securities and Exchange Commission. Our filings are publicly available on our investor information home page at investor.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. 4287. We disclaim any intent or obligation to update our forward-looking statements.

Contacts:

Investors and Financial Media:

Katharine Kenny, Vice President, Investor Relations, (804) 935-4591

Celeste Gunter, Manager, Investor Relations, (804) 935-4597

General Media:

Trina Lee, Director, Public Relations (804) 747-0422, ext. 4197

Britt Farrar, Manager, Public Relations, (804)747-0422, ext. 3473

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CarMax, Inc.

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CARMAX, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

(UNAUDITED)

(In thousands except per share data)


	Three Months Ended February 29 or 28								Fiscal Year Ended February 29 or 28
	2012		% *⁽²⁾*		2011		% *⁽²⁾*		2012 ⁽¹⁾		% *⁽²⁾*		2011 ⁽¹⁾		% *⁽²⁾*

Sales and operating revenues:
Used vehicle sales	$	1,973,698		79.7	$	1,799,884		79.9	$	7,826,911		78.2	$	7,210,017		80.3
New vehicle sales		45,848		1.9		48,906		2.2		200,584		2.0		198,532		2.2
Wholesale vehicle sales		395,721		16.0		335,208		14.9		1,721,647		17.2		1,301,703		14.5
Other sales and revenues		60,582		2.4		68,635		3.0		254,457		2.5		265,302		3.0

Net sales and operating revenues		2,475,849		100.0		2,252,633		100.0		10,003,599		100.0		8,975,554		100.0
Cost of sales		2,137,677		86.3		1,931,981		85.8		8,624,838		86.2		7,674,326		85.5

Gross profit		338,172		13.7		320,652		14.2		1,378,761		13.8		1,301,228		14.5
CarMax Auto Finance income		66,073		2.7		54,139		2.4		262,185		2.6		219,983		2.5
Selling, general and administrative expenses		243,479		9.8		226,906		10.1		940,786		9.4		878,805		9.8
Interest expense		8,351		0.3		8,554		0.4		33,714		0.3		34,680		0.4
Other income		345		—		100		—		464		—		480		—

Earnings before income taxes		152,760		6.2		139,431		6.2		666,910		6.7		608,206		6.8
Income tax provision		57,729		2.3		50,677		2.2		253,115		2.5		230,711		2.6

Net earnings	$	95,031		3.8	$	88,754		3.9	$	413,795		4.1	$	377,495		4.2


Weighted average common shares:
Basic		226,822				224,801				226,282				223,449
Diluted		231,300				229,656				230,721				227,601

Net earnings per share:
Basic	$	0.42			$	0.39			$	1.83			$	1.68
Diluted	$	0.41			$	0.39			$	1.79			$	1.65

⁽¹⁾

Revisions to correct our accounting for sale-leasebacks reduced reported net earnings per diluted share by $0.02 in both fiscal 2012 and fiscal 2011.

⁽²⁾

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

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CARMAX, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(In thousands)


	February 29 2012		February 28 2011 ⁽¹⁾
ASSETS
Current assets:
Cash and cash equivalents	$	442,658	$	41,121
Restricted cash from collections on auto loan receivables		204,314		161,052
Accounts receivable, net		86,434		119,597
Inventory		1,092,592		1,049,477
Deferred income taxes		9,938		5,191
Other current assets		17,512		33,660


Total current assets		1,853,448		1,410,098

Auto loan receivables, net		4,959,847		4,320,575
Property and equipment, net		1,278,722		1,175,317
Deferred income taxes		133,134		123,685
Other assets		106,392		95,874


TOTAL ASSETS	$	8,331,543	$	7,125,549


LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	324,827	$	269,763
Accrued expenses and other current liabilities		128,973		105,998
Accrued income taxes		3,125		772
Short-term debt		943		1,002
Current portion of financing and capital lease obligations		14,108		12,617
Current portion of non-recourse notes payable		174,337		132,519


Total current liabilities		646,313		522,671

Financing and capital lease obligations, excluding current portion		353,566		367,617
Non-recourse notes payable, excluding current portion		4,509,752		3,881,142
Other liabilities		148,800		114,870


TOTAL LIABILITIES		5,658,431		4,886,300

TOTAL SHAREHOLDERS’ EQUITY		2,673,112		2,239,249


TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	8,331,543	$	7,125,549

⁽¹⁾

Revisions to correct our accounting for sale-leasebacks increased total assets by $285.6 million and total liabilities by $338.0 million, and reduced total shareholders’ equity by $52.4 million as of February 28, 2011.

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CarMax, Inc.

Page 11 of 13

CARMAX, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(In thousands)


	Fiscal Year Ended February 29 or 28
	2012			2011 ⁽¹⁾
Operating Activities:
Net earnings	$	413,795		$	377,495
Adjustments to reconcile net earnings to net cash used in operating activities:
Depreciation and amortization		82,812			76,321
Share-based compensation expense		48,089			43,606
Provision for loan losses		36,439			27,749
Loss on disposition of assets		2,817			1,143
Deferred income tax (benefit) provision		(872	)		17,493
Net decrease (increase) in:
Accounts receivable, net		33,163			(40,538	)
Retained interest in securitized receivables		—			43,746
Inventory		(43,115	)		(206,344	)
Other current assets		15,919			(27,403	)
Auto loan receivables, net		(675,711	)		(304,729	)
Other assets		(6,986	)		(7,173	)
Net increase (decrease) in:
Accounts payable, accrued expenses and other current liabilities and accrued income taxes		43,138			(8,802	)
Other liabilities		(11,652	)		678

Net cash used in operating activities		(62,164	)		(6,758	)

Investing Activities:
Capital expenditures		(172,616	)		(76,580	)
Proceeds from sales of assets		8			8
(Increase) decrease in restricted cash from collections on auto loan receivables		(43,262	)		1,556
Increase in restricted cash in reserve accounts		(12,364	)		(12,631	)
Release of restricted cash from reserve accounts		12,096			11,434
(Purchases) sales of money market securities, net		(678	)		4,001
Purchase of investments available-for-sale		(2,638	)		—
Sales of investments available-for-sale		52			—

Net cash used in investing activities		(219,402	)		(72,212	)

Financing Activities:
(Decrease) increase in short-term debt, net		(59	)		119
Issuances of long-term debt		—			243,300
Payments on long-term debt		—			(364,900	)
Payments on financing and capital lease obligations		(12,560	)		(11,145	)
Issuances of non-recourse notes payable		5,130,000			3,348,000
Payments on non-recourse notes payable		(4,459,572	)		(3,160,749	)
Equity issuances, net		15,577			38,277
Excess tax benefits from share-based payment arrangements		9,717			8,911

Net cash provided by financing activities		683,103			101,813


Increase in cash and cash equivalents		401,537			22,843
Cash and cash equivalents at beginning of year		41,121			18,278

Cash and cash equivalents at end of year	$	442,658		$	41,121

⁽¹⁾

Revisions to correct our accounting for sale-leasebacks reduced fiscal 2011 net cash used in operating activities by $10.4 million and net cash provided by financing activities by an equal amount.

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CARMAX, INC. AND SUBSIDIARIES

SUPPLEMENTAL FINANCIAL INFORMATION

REVISED CONSOLIDATED QUARTERLY STATEMENTS OF EARNINGS ⁽¹⁾

FISCAL YEAR ENDED FEBRUARY 29, 2012

(UNAUDITED)

(In thousands except per share data)


	Q1 FY12		% *⁽²⁾*		Q2 FY12		% *⁽²⁾*		Q3 FY12			% *⁽²⁾*		Q4 FY12		% *⁽²⁾*

Sales and operating revenues:
Used vehicle sales	$	2,071,540		77.3	$	2,014,983		77.9	$	1,766,690			78.2	$	1,973,698		79.7
New vehicle sales		61,886		2.3		46,853		1.8		45,997			2.0		45,848		1.9
Wholesale vehicle sales		477,794		17.8		457,870		17.7		390,262			17.3		395,721		16.0
Other sales and revenues		68,197		2.5		68,113		2.6		57,565			2.5		60,582		2.4

Net sales and operating revenues		2,679,417		100.0		2,587,819		100.0		2,260,514			100.0		2,475,849		100.0
Cost of sales		2,296,322		85.7		2,233,544		86.3		1,957,295			86.6		2,137,677		86.3

Gross profit		383,095		14.3		354,275		13.7		303,219			13.4		338,172		13.7
CarMax Auto Finance income		69,661		2.6		63,826		2.5		62,625			2.8		66,073		2.7
Selling, general and administrative expenses		241,655		9.0		229,887		8.9		225,765			10.0		243,479		9.8
Interest expense		8,540		0.3		8,464		0.3		8,359			0.4		8,351		0.3
Other income (expense)		103		—		110		—		(94	)		—		345		—

Earnings before income taxes		202,664		7.6		179,860		7.0		131,626			5.8		152,760		6.2
Income tax provision		77,164		2.9		68,706		2.7		49,516			2.2		57,729		2.3

Net earnings	$	125,500		4.7	$	111,154		4.3	$	82,110			3.6	$	95,031		3.8


Weighted average common shares:
Basic		225,570				226,300				226,446					226,822
Diluted		230,278				230,681				230,632					231,300

Net earnings per share:
Basic	$	0.56			$	0.49			$	0.36				$	0.42
Diluted	$	0.54			$	0.48			$	0.36				$	0.41

⁽¹⁾

The consolidated statements of earnings for the interim quarters in the fiscal year ended February 29, 2012, have been revised to correct our accounting for sale-leasebacks entered into between 1995 and 2009.

⁽²⁾

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

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CarMax, Inc.

Page 13 of 13

CARMAX, INC. AND SUBSIDIARIES

SUPPLEMENTAL FINANCIAL INFORMATION

REVISED CONSOLIDATED QUARTERLY STATEMENTS OF EARNINGS ⁽¹⁾

FISCAL YEAR ENDED FEBRUARY 28, 2011

(UNAUDITED)

(In thousands except per share data)


	Q1 FY11		% *⁽²⁾*		Q2 FY11		% *⁽²⁾*		Q3 FY11		% *⁽²⁾*		Q4 FY11		% *⁽²⁾*

Sales and operating revenues:
Used vehicle sales	$	1,832,066		81.0	$	1,889,598		80.7	$	1,688,469		79.7	$	1,799,884		79.9
New vehicle sales		50,898		2.3		51,057		2.2		47,671		2.2		48,906		2.2
Wholesale vehicle sales		316,489		14.0		329,889		14.1		320,117		15.1		335,208		14.9
Other sales and revenues		62,459		2.8		71,336		3.0		62,872		3.0		68,635		3.0

Net sales and operating revenues		2,261,912		100.0		2,341,880		100.0		2,119,129		100.0		2,252,633		100.0
Cost of sales		1,928,364		85.3		1,992,762		85.1		1,821,219		85.9		1,931,981		85.8

Gross profit		333,548		14.7		349,118		14.9		297,910		14.1		320,652		14.2
CarMax Auto Finance income		57,495		2.5		52,604		2.2		55,745		2.6		54,139		2.4
Selling, general and administrative expenses		220,079		9.7		218,664		9.3		213,156		10.1		226,906		10.1
Interest expense		8,081		0.4		9,361		0.4		8,684		0.4		8,554		0.4
Other income (expense)		80		—		102		—		198		—		100		—

Earnings before income taxes		162,963		7.2		173,799		7.4		132,013		6.2		139,431		6.2
Income tax provision		62,738		2.8		66,794		2.9		50,502		2.4		50,677		2.2

Net earnings	$	100,225		4.4	$	107,005		4.6	$	81,511		3.8	$	88,754		3.9


Weighted average common shares:
Basic		222,221				222,857				223,953				224,801
Diluted		226,179				226,132				228,471				229,656

Net earnings per share:
Basic	$	0.45			$	0.48			$	0.36			$	0.39
Diluted	$	0.44			$	0.47			$	0.36			$	0.39

⁽¹⁾

The consolidated statements of earnings for the interim quarters in the fiscal year ended February 28, 2011, have been revised to correct our accounting for sale-leasebacks entered into between 1995 and 2009.

⁽²⁾

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

###

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