Business Wire | Apr 1, 2021 06:50AM EDT

CarMax Reports Fourth Quarter and Fiscal Year 2021 Results

Apr. 01, 2021

RICHMOND, Va.--(BUSINESS WIRE)--Apr. 01, 2021--CarMax, Inc. (NYSE:KMX), the nation's largest and most profitable retailer of used cars, today reported results for the fourth quarter and fiscal year ended February 28, 2021.

Fourth Quarter Highlights and Recent Developments:

* Net sales and operating revenues increased 4.1% to $5.16 billion when compared with the prior year fourth quarter. Net earnings decreased 2.3% to $209.9 million and net earnings per diluted share decreased 2.3% to $1.27 compared with the prior year quarter. * Total used unit sales and unit sales in comparable stores decreased 0.9% and 2.3%, respectively, and wholesale units decreased 1.2% when compared with the prior year quarter. Total used, comparable store unit, and wholesale unit sales were positive for the quarter when excluding the impact of calendar shifts. Sales impacted by the delay in tax refunds and severe weather. On a two-year stack, total used and comparable store unit sales were up 13.8% and 8.7%, respectively. * Robust used unit sales growth in March 2021 when compared with COVID-impacted March 2020 and a record March 2019. Increase supported by the initial distribution of tax refund and stimulus checks, improved weather, and favorable customer response to digital enhancements and strategic initiatives. * CarMax Auto Finance (CAF) income increased 68.2% due to the combined effects of favorable loan loss performance, higher net interest margin and an increase in average managed receivables. * Three-quarters of our customers advanced their transaction digitally, with approximately 25% of our customers eligible to buy a vehicle online independently. * Completed nationwide rollout of online instant appraisal offer on carmax.com, positioning us to become the largest online buyer of used autos from consumers and strengthening our leadership as the largest used auto buyer from consumers. * Signed a definitive agreement to acquire Edmunds, further strengthening our role and reach across the used auto ecosystem while adding exceptional technology and creative talent.

CEO Commentary:

"We are extremely proud of what we have accomplished this year and how the strategic changes we have made to our business position us for accelerated growth across retail, wholesale and CarMax Auto Finance," said Bill Nash, president and chief executive officer. "Our omni-channel experience and Love Your Car Guarantee further enhance the most customer-centric offering on the market today. Additionally, the rapid adoption of our online instant appraisal offer positions us to become the largest online buyer of used autos from consumers.

"The acquisition of Edmunds will further strengthen the role and reach of both companies," continued Nash. "Our partnership to date has proven to be an outstanding combination as we've developed innovative products, including an online instant appraisal offer on both edmunds.com and carmax.com. We look forward to collaborating on new products and initiatives leveraging Edmunds' industry-leading content and technology expertise to serve both CarMax and Edmunds' customers."

Nash concluded by stating, "We have the technology, data, talent, physical assets and scale to unlock opportunities across the used auto ecosystem. We're excited about the future as we expect robust top line, bottom line and market share growth for the upcoming year."

Edmunds Acquisition:

In a separate release issued today, we announced that we have signed a definitive agreement to acquire Edmunds, one of the most well established and trusted online guides for automotive information and a recognized industry leader in digital car shopping innovations. With this acquisition, CarMax will enhance its digital capabilities and further strengthen its role and reach across the used auto ecosystem while adding exceptional technology and creative talent. Edmunds will continue to operate independently and will remain focused on delivering confidence to consumers and excellent value to its dealer and OEM clients. Additionally, this acquisition will allow both businesses to accelerate their respective capabilities to deliver an enhanced digital experience to their customers by leveraging Edmunds' compelling content and technology, our unparalleled national scale and infrastructure, and the combined talent of both businesses. A copy of the news release is available on our investor relations website at investors.carmax.com under the News Releases tab.

Fourth Quarter Business Performance Review:

Sales. Total used vehicle unit sales decreased 0.9% while comparable store used unit sales decreased 2.3% compared with increases of 14.7% and 11.0%, respectively, for the prior year's fourth quarter. Excluding the added benefit of leap day in the prior year quarter, both total used unit and comparable store sales would have increased slightly year-over-year. For the first part of the quarter, retail sales were pressured due to the surge in COVID-19 cases, resulting in the tightening of occupancy restrictions and shelter-in-place orders. Sales then began to accelerate towards the end of December and into January as we launched our new marketing campaign, expanded our pricing tests, introduced new customer offerings and a second round of stimulus checks was issued. This trend continued until the middle of February when severe winter weather across a large portion of the U.S., delays in tax refunds relative to last year's timing, and a lower inventory position due to COVID- and weather-related production constraints, negatively impacted retail sales. Total used vehicle revenues increased 1.8% due primarily to higher average retail selling prices versus the prior year quarter.

Total wholesale vehicle unit sales decreased 1.2% compared with the fourth quarter of fiscal 2020. The decrease in units was due to one less auction day in the quarter when compared with the prior year, the delays in tax refunds, severe weather and lower store traffic. This was partially offset by a strong fourth quarter appraisal buy rate.

Other sales and revenues decreased 1.9% to $157.4 million when compared with the fourth quarter of fiscal 2020. This decrease was mostly due to the divestiture of a new car franchise, partially offset by the 72.9% improvement in net third-party finance fees due to the favorable renegotiation of fee structures with Tier 2 and Tier 3 third-party finance providers.

Gross Profit. Total gross profit decreased 4.7% versus last year's fourth quarter to $641.4 million. Used vehicle gross profit declined 5.8%, reflecting the decrease in total used unit sales and the impact of price reduction tests rolled out in select markets. Used vehicle gross profit per unit decreased to $2,086 compared with $2,195 in the prior year's quarter and was consistent with our expectations. Wholesale vehicle gross profit decreased 1.5% versus the prior year's quarter, reflecting the loss of an auction day when compared with the prior year. Wholesale vehicle gross profit of $990 per unit was in-line with the prior year quarter. Other gross profit decreased 3.2%, reflecting a decline in service profits, partially offset by changes in net third-party finance provider fees and growth in EPP revenues, which was driven by favorable adjustments to cancellation reserves and an increase in profit sharing revenue.

SG&A. SG&A expenses increased 14.7% to $556.1 million when compared with the fourth quarter of fiscal 2020. Factors contributing to the increase include a $32.7 million increase in stock-based compensation expense and a $23.0 million increase in advertising expense. The growth in stock-based compensation expense was primarily driven by the 27.8% increase in our stock price during the current quarter versus the 10.2% decrease during the prior year quarter. Advertising expense increased due to the heavier support for our new advertising campaign launched at the end of December. SG&A per used unit was $2,713, up $368 year-over-year, largely reflecting the deleverage associated with the decline in comparable store used unit sales, the $160 per unit increase in stock-based compensation expense, the $115 per unit increase primarily in awareness advertising expense and the continued spending to advance our technology platforms and strategic support initiatives. We expect marketing spend in fiscal 2022 to remain elevated with similar per unit expenses in the second half of fiscal 2021.

CarMax Auto Finance.(1) CAF income increased 68.2% to $188.2 million when compared with last year's fourth quarter, reflecting a decrease in the provision for loan losses to $4.6 million from $53.0 million in the prior year quarter, plus an increase in net interest margin and average managed receivables. This lower provision was a function of the observed favorable loan loss experience within the quarter compared with expectations set at the end of the third quarter, as well as our outlook on future losses. As of February 28, 2021, the allowance for loan losses of $411.1 million was 2.97% of ending managed receivables, down from 3.17% as of November 30, 2020.

CAF's total interest margin percentage, which represents the spread between interest and fees charged to consumers and our funding costs, improved to 6.4% of average managed receivables from 5.8% in the prior year's fourth quarter, primarily due to lower funding costs. After the effect of 3-day payoffs, CAF financed 43.5% of units sold in the current quarter, in-line with the prior year's fourth quarter.

CAF will increase its targeted Tier 3 share from 5% to 10% with the anticipation of reaching this level by the end of the first quarter. We will continue to evaluate the lending environment and will consider adjusting the target if and when we believe changes are sustainable and in the best interest of our long-term business goals.

Share Repurchase Activity. We repurchased 0.7 million shares of common stock for $66.3 million pursuant to our share repurchase program during the fourth quarter of fiscal 2021. As of February 28, 2021, we had $1.34 billion remaining available for repurchase under the outstanding authorization.

Fiscal 2022 Capital Spending Plan. We estimate capital expenditures will increase to approximately $350 million in fiscal 2022, up from $164.5 million in fiscal 2021 and $331.9 million in fiscal 2020. The increase in planned capital spending in fiscal 2022 reflects several factors, including continued spending on technology and the opening of 10 new locations.

^ Although CAF benefits from certain indirect overhead expenditures, we have(1) 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 February 28 or 29 Years Ended February 28 or 29

(In 2021 2020 Change 2021 2020 Changemillions)

Usedvehicle $ 4,328.4 $ 4,253.7 1.8 % $ 15,713.6 $ 17,169.5 (8.5) %sales

Wholesalevehicle 678.5 548.3 23.7 % 2,668.8 2,500.0 6.7 %sales

Other salesand revenues:

Extendedprotection 118.3 115.7 2.3 % 412.8 437.4 (5.6) %planrevenues

Third-partyfinance (2.9) (10.6) 72.9 % (39.6) (45.8) 13.6 %fees, net

Other 42.0 55.4 (24.2) % 194.6 258.9 (24.8) %

Total othersales and 157.4 160.5 (1.9) % 567.8 650.5 (12.7) %revenues

Total netsales and $ 5,164.3 $ 4,962.5 4.1 % $ 18,950.1 $ 20,320.0 (6.7) %operatingrevenues

Unit Sales

Three Months Ended February 28 Years Ended February 28 or or 29 29

2021 2020 Change 2021 2020 Change

Used vehicles 204,928 206,718 (0.9) % 751,862 832,640 (9.7) %

Wholesale 103,676 104,900 (1.2) % 426,268 466,177 (8.6) %vehicles

Average Selling Prices

Three Months Ended February 28 Years Ended February 28 or 29 or 29

2021 2020 Change 2021 2020 Change

Used vehicles $ 20,980 $ 20,380 2.9 % $ 20,690 $ 20,418 1.3 %

Wholesale $ 6,207 $ 4,954 25.3 % $ 5,957 $ 5,089 17.1 %vehicles

Vehicle Sales Changes

Three Months Ended Years Ended February 28 or 29 February 28 or 29

2021 2020 2021 2020

Used vehicle units (0.9) % 14.7 % (9.7) % 11.2 %

Used vehicle revenues 1.8 % 17.2 % (8.5) % 13.2 %



Wholesale vehicle units (1.2) % 2.0 % (8.6) % 4.2 %

Wholesale vehicle revenues 23.7 % 0.8 % 6.7 % 4.5 %

Comparable Store Used Vehicle Sales Changes (1)

Three Months Years Ended Ended February 28 or 29 February 28 or 29

2021 2020 2021 2020

Used vehicle units (2.3) % 11.0 % (11.7) % 7.7 %

Used vehicle revenues 0.6 % 13.4 % (10.5) % 9.7 %

(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)

Stores are added to the comparable store base beginning in their^ fourteenth full month of operation. Comparable store calculations include(1) 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 Years Ended February 28 or 29 February 28 or 29

2021 2020 2021 2020

CAF ^(2) 47.0 % 46.7 % 45.5 % 46.7 %

Tier 2^ (3) 21.0 % 20.5 % 22.3 % 20.2 %

Tier 3^ (4) 9.5 % 10.0 % 10.9 % 10.2 %

Other^ (5) 22.5 % 22.8 % 21.3 % 22.9 %

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 3 loan originations, which represent less than 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

^ Calculated as used vehicle units financed for respective channel as a(1) percentage of total used units sold.

^ Includes CAF's Tier 3 loan originations, which represent less than 1% of(2) total used units sold.

^ Third-party finance providers who generally pay us a fee or to whom no fee(3) is paid.

^ Third-party finance providers to whom we pay a fee.(4)

^ Represents customers arranging their own financing and customers that do(5) not require financing.

Selected Operating Ratios

Three Months Ended February 28 or 29 Years Ended February 28 or 29

(In millions) 2021 % ^(1) 2020 % ^(1) 2021 % ^(1) 2020 % ^(1)

Net sales andoperating $ 5,164.3 100.0 $ 4,962.5 100.0 $ 18,950.1 100.0 $ 20,320.0 100.0 revenues

Gross profit $ 641.4 12.4 $ 672.9 13.6 $ 2,379.1 12.6 $ 2,722.3 13.4

CarMax Auto $ 188.2 3.6 $ 111.9 2.3 $ 562.8 3.0 $ 456.0 2.2 Finance income

Selling,general, and $ 556.1 10.8 $ 484.7 9.8 $ 1,898.8 10.0 $ 1,940.1 9.5 administrativeexpenses

Interest $ 20.3 0.4 $ 22.3 0.4 $ 86.2 0.5 $ 83.0 0.4 expense

Earningsbefore income $ 262.2 5.1 $ 276.6 5.6 $ 965.3 5.1 $ 1,161.0 5.7 taxes

Net earnings $ 209.9 4.1 $ 214.9 4.3 $ 746.9 3.9 $ 888.4 4.4

(1)

Calculated as a percentage of net sales and operating revenues.

Gross Profit

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

Gross Profit

Three Months Ended February 28 Years Ended February 28 or 29 or 29

(In 2021 2020 Change 2021 2020 Changemillions)

Usedvehicle $ 427.6 $ 453.7 (5.8) % $ 1,588.9 $ 1,820.1 (12.7) %grossprofit

Wholesalevehicle 102.6 104.2 (1.5) % 423.3 454.4 (6.8) %grossprofit

Othergross 111.2 115.0 (3.2) % 366.9 447.8 (18.1) %profit

Total $ 641.4 $ 672.9 (4.7) % $ 2,379.1 $ 2,722.3 (12.6) %

Gross Profit per Unit

Three Months Ended February 28 or Years Ended February 28 or 29 29

2021 2020 2021 2020

$ per %^(2) $ per %^(2) $ per %^(2) $ per %^(2) unit^(1) unit^(1) unit^(1) unit^(1)

Usedvehicle $ 2,086 9.9 $ 2,195 10.7 $ 2,113 10.1 $ 2,186 10.6 grossprofit

Wholesalevehicle $ 990 15.1 $ 993 19.0 $ 993 15.9 $ 975 18.2 grossprofit

Othergross $ 543 70.6 $ 556 71.6 $ 488 64.6 $ 538 68.9 profit

Totalgross $ 3,130 12.4 $ 3,255 13.6 $ 3,164 12.6 $ 3,270 13.4 profit

(1)

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

(2)

Calculated as a percentage of its respective sales or revenue.

SG&A Expenses

^ Calculated as category gross profit divided by its respective units sold,(1) except the other and total categories, which are divided by total used units sold.

^ Calculated as a percentage of its respective sales or revenue.(2)

SG&A Expenses

Three Months Ended February 28 Years Ended February 28 or 29 or 29

(In 2021 2020 Change 2021 2020 Changemillions)

Compensationand benefits:

Compensationandbenefits,excluding $ 248.4 $ 238.5 4.2 % $ 909.8 $ 913.2 (0.4) %share-basedcompensationexpense

Share-basedcompensation 43.1 10.4 314.6 % 111.7 99.4 12.4 %expense

Totalcompensation $ 291.5 $ 248.9 17.1 % $ 1,021.5 $ 1,012.6 0.9 %and benefits^ (1)

Storeoccupancy 101.6 102.1 (0.5) % 399.1 393.4 1.5 %costs

Advertising 73.7 50.7 45.4 % 217.5 191.3 13.7 %expense

Otheroverhead 89.3 83.0 7.5 % 260.7 342.8 (24.0) %costs^ (2)

Total SG&A $ 556.1 $ 484.7 14.7 % $ 1,898.8 $ 1,940.1 (2.1) %expenses

SG&A per $ 2,713 $ 2,345 $ 368 $ 2,525 $ 2,330 $ 195 used unit

(1)

Excludes compensation and benefits related to reconditioning and vehicle repair service, which are included in cost of sales.

(2)

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

^ Excludes compensation and benefits related to reconditioning and vehicle(1) repair service, which are included in cost of sales.

^ Includes IT expenses, non-CAF bad debt, insurance, preopening and(2) relocation costs, charitable contributions, travel and other administrative expenses.

Components of CAF Income and Other CAF Information

Three Months Ended February 28 or 29 Years Ended February 28 or 29

(In 2021 % ^(1) 2020 % ^(1) 2021 % ^(1) 2020 % ^(1)millions)

Interest margin:

Interest and $ 290.9 8.5 $ 283.3 8.4 $ 1,142.0 8.5 $ 1,104.1 8.4 fee income

Interest (71.1) (2.1) (89.7) (2.7) (314.1) (2.3) (358.1) (2.7) expense

Totalinterest 219.8 6.4 193.6 5.8 827.9 6.1 746.0 5.7 margin

Provisionfor loan (4.6) (0.1) (53.0) (1.6) (160.7) (1.2) (185.7) (1.4) losses

Totalinterestmargin after 215.2 6.3 140.6 4.2 667.2 5.0 560.3 4.3 provisionfor loanlosses



Total other - - - - (2.2) - - - expense



Total direct (27.0) (0.8) (28.7) (0.9) (102.2) (0.8) (104.3) (0.8) expenses

CarMax AutoFinance $ 188.2 5.5 $ 111.9 3.3 $ 562.8 4.2 $ 456.0 3.5 income



Totalaverage $ 13,708.6 $ 13,461.9 $ 13,463.3 $ 13,105.1 managedreceivables

Net loans $ 1,787.2 $ 1,792.5 $ 6,395.0 $ 7,089.7 originated

Netpenetration 43.5 % 43.0 % 42.5 % 42.5 % rate

Weightedaverage 8.5 % 7.9 % 8.4 % 8.4 % contractrate



Endingallowance $ 411.1 $ 157.8 $ 411.1 $ 157.8 for loanlosses



Warehousefacility information:

Endingfunded $ 2,314.1 $ 2,181.7 $ 2,314.1 $ 2,181.7 receivables

Endingunused $ 1,610.9 $ 1,318.3 $ 1,610.9 $ 1,318.3 capacity



(1)

Annualized percentage of total average managed receivables.

Earnings Highlights

^(1) Annualized percentage of total average managed receivables.

Earnings Highlights

Three Months Ended February 28 Years Ended February 28 or 29 or 29

(In millionsexcept per 2021 2020 Change 2021 2020 Changeshare data)

Net earnings $ 209.9 $ 214.9 (2.3) % $ 746.9 $ 888.4 (15.9) %

Dilutedweightedaverage 165.6 165.8 (0.1) % 165.1 166.8 (1.0) %sharesoutstanding

Net earningsper diluted $ 1.27 $ 1.30 (2.3) % $ 4.52 $ 5.33 (15.2) %share

Conference Call Information

We will host a conference call for investors at 9:00 a.m. ET today, April 1, 2021. 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 8345969. 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 June 24, 2021, or via telephone (for approximately one week) by dialing 1-855-859-2056 (or 1-404-537-3406 for international access) and entering the conference ID 8345969.

First Quarter Fiscal 2022 Earnings Release Date

We currently plan to release results for the first quarter ending May 31, 2021, on Friday, June 25, 2021, 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 2021.

About CarMax

CarMax, the nation's largest retailer of used cars, 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, contactless curbside pickup and appointments in its stores. During the fiscal year ending February 28, 2021, CarMax sold more than 750,000 used cars and more than 425,000 wholesale vehicles at its in-store and virtual auctions. In addition, CarMax Auto Finance originated more than $6 billion in receivables during fiscal year 2021, adding to its near $14 billion portfolio. CarMax has 220 stores, over 25,000 Associates, and is proud to have been recognized for 16 consecutive years as one of the Fortune 100 Best Companies to Work For(r). For more information, visit www.carmax.com.

Forward-Looking Statements

We caution readers that the statements contained in this release about our future business plans, operations, challenges, opportunities or prospects, including without limitation any statements or factors regarding strategic transactions, expected operating capacity, sales, market share, margins, expenses, liquidity, capital expenditures, debt obligations, tax rates 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," "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:

* 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 and their access to effective vaccines; 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. * 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. * Our inability to realize the expected benefits of strategic transactions, including our proposed acquisition of Edmunds. * 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 investments. * 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 29, 2020, 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 February 28 or 29 Years Ended February 28 or 29

(In thousandsexcept per 2021 % ^(1) 2020 % ^(1) 2021 % ^(1) 2020 % ^(1)share data)

SALES ANDOPERATING REVENUES:

Used vehicle $ 4,328,400 83.8 $ 4,253,699 85.7 $ 15,713,583 82.9 $ 17,169,462 84.5 sales

Wholesale 678,457 13.1 548,324 11.0 2,668,753 14.1 2,500,042 12.3 vehicle sales

Other sales 157,400 3.0 160,467 3.2 567,813 3.0 650,483 3.2 and revenues

NET SALES ANDOPERATING 5,164,257 100.0 4,962,490 100.0 18,950,149 100.0 20,319,987 100.0 REVENUES

COST OF SALES:

Used vehicle 3,900,840 75.5 3,799,956 76.6 14,124,715 74.5 15,349,401 75.5 cost of sales

Wholesalevehicle cost 575,836 11.2 444,107 8.9 2,245,431 11.8 2,045,680 10.1 of sales

Other cost of 46,212 0.9 45,570 0.9 200,878 1.1 202,566 1.0 sales

TOTAL COST OF 4,522,888 87.6 4,289,633 86.4 16,571,024 87.4 17,597,647 86.6 SALES

GROSS PROFIT 641,369 12.4 672,857 13.6 2,379,125 12.6 2,722,340 13.4

CARMAX AUTO 188,220 3.6 111,907 2.3 562,810 3.0 456,030 2.2 FINANCE INCOME

Selling,general, and 556,054 10.8 484,728 9.8 1,898,775 10.0 1,940,067 9.5 administrativeexpenses

Interest 20,289 0.4 22,307 0.4 86,178 0.5 83,007 0.4 expense

Other (income) (9,003) (0.2) 1,096 - (8,275) - (5,690) - expense

Earningsbefore income 262,249 5.1 276,633 5.6 965,257 5.1 1,160,986 5.7 taxes

Income tax 52,304 1.0 61,699 1.2 218,338 1.2 272,553 1.3 provision

NET EARNINGS $ 209,945 4.1 $ 214,934 4.3 $ 746,919 3.9 $ 888,433 4.4

WEIGHTED AVERAGE COMMON SHARES:

Basic 162,893 163,371 163,183 164,836

Diluted 165,596 165,810 165,133 166,820

NET EARNINGS PER SHARE:

Basic $ 1.29 $ 1.32 $ 4.58 $ 5.39

Diluted $ 1.27 $ 1.30 $ 4.52 $ 5.33

(1)

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

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

CARMAX, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

As of

February 28

February 29

(In thousands except share data)

2021

2020

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$

132,319

$

58,211

Restricted cash from collections on auto loans receivable

496,415

481,043

Accounts receivable, net

239,070

191,090

Inventory

3,157,159

2,846,416

Other current assets

91,833

86,927

TOTAL CURRENT ASSETS

4,116,796

3,663,687

Auto loans receivable, net

13,489,819

13,551,711

Property and equipment, net

3,055,563

3,069,102

Deferred income taxes

164,261

89,842

Operating lease assets

431,652

449,094

Other assets

283,450

258,746

TOTAL ASSETS

$

21,541,541

$

21,082,182

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:

Accounts payable

$

799,333

$

737,144

Accrued expenses and other current liabilities

415,465

331,738

Accrued income taxes

218

1,389

Current portion of operating lease liabilities

30,953

30,980

Short-term debt

-

40

Current portion of long-term debt

9,927

9,251

Current portion of non-recourse notes payable

442,652

424,165

TOTAL CURRENT LIABILITIES

1,698,548

1,534,707

Long-term debt, excluding current portion

1,322,415

1,778,672

Non-recourse notes payable, excluding current portion

13,297,504

13,165,384

Operating lease liabilities, excluding current portion

423,618

440,671

Other liabilities

434,843

393,873

TOTAL LIABILITIES

17,176,928

17,313,307

Commitments and contingent liabilities

SHAREHOLDERS' EQUITY:

Common stock, $0.50 par value; 350,000,000 shares authorized; 163,172,333 and 163,081,376 shares issued and outstanding as of February 28, 2021 and February 29, 2020, respectively

81,586

81,541

Capital in excess of par value

1,513,821

1,348,988

Accumulated other comprehensive loss

(118,691)

(150,071)

Retained earnings

2,887,897

2,488,417

TOTAL SHAREHOLDERS' EQUITY

4,364,613

3,768,875

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

21,541,541

$

21,082,182

CARMAX, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

As of

February 28 February 29

(In thousands except share data) 2021 2020

ASSETS

CURRENT ASSETS:

Cash and cash equivalents $ 132,319 $ 58,211

Restricted cash from collections on auto 496,415 481,043 loans receivable

Accounts receivable, net 239,070 191,090

Inventory 3,157,159 2,846,416

Other current assets 91,833 86,927

TOTAL CURRENT ASSETS 4,116,796 3,663,687

Auto loans receivable, net 13,489,819 13,551,711

Property and equipment, net 3,055,563 3,069,102

Deferred income taxes 164,261 89,842

Operating lease assets 431,652 449,094

Other assets 283,450 258,746

TOTAL ASSETS $ 21,541,541 $ 21,082,182



LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:

Accounts payable $ 799,333 $ 737,144

Accrued expenses and other current 415,465 331,738 liabilities

Accrued income taxes 218 1,389

Current portion of operating lease 30,953 30,980 liabilities

Short-term debt - 40

Current portion of long-term debt 9,927 9,251

Current portion of non-recourse notes payable 442,652 424,165

TOTAL CURRENT LIABILITIES 1,698,548 1,534,707

Long-term debt, excluding current portion 1,322,415 1,778,672

Non-recourse notes payable, excluding current 13,297,504 13,165,384 portion

Operating lease liabilities, excluding 423,618 440,671 current portion

Other liabilities 434,843 393,873

TOTAL LIABILITIES 17,176,928 17,313,307



Commitments and contingent liabilities

SHAREHOLDERS' EQUITY:

Common stock, $0.50 par value; 350,000,000 shares authorized; 163,172,333 and 163,081,376 shares issued and outstanding as 81,586 81,541 of February 28, 2021 and February 29, 2020, respectively

Capital in excess of par value 1,513,821 1,348,988

Accumulated other comprehensive loss (118,691) (150,071)

Retained earnings 2,887,897 2,488,417

TOTAL SHAREHOLDERS' EQUITY 4,364,613 3,768,875

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 21,541,541 $ 21,082,182

CARMAX, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

Years Ended February 28 or 29

(In thousands)

2021

2020

OPERATING ACTIVITIES:

Net earnings

$

746,919

$

888,433

Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:

Depreciation and amortization

242,156

215,811

Share-based compensation expense

121,899

108,861

Provision for loan losses

160,703

185,695

Provision for cancellation reserves

72,235

89,272

Deferred income tax benefit

(35,787)

(1,102)

Other

(1,409)

3,507

Net (increase) decrease in:

Accounts receivable, net

(43,507)

(51,240)

Inventory

(323,318)

(326,961)

Other current assets

(50)

(19,843)

Auto loans receivable, net

(300,838)

(1,308,919)

Other assets

(12,862)

4,265

Net increase (decrease) in:

Accounts payable, accrued expenses and other

current liabilities and accrued income taxes

106,788

85,442

Other liabilities

(65,169)

(109,827)

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

667,760

(236,606)

INVESTING ACTIVITIES:

Capital expenditures

(164,536)

(331,896)

Proceeds from disposal of property and equipment

1,846

3

Proceeds from sale of business

29,911

-

Purchases of investments

(3,729)

(59,050)

Sales and returns of investments

8,325

1,579

NET CASH USED IN INVESTING ACTIVITIES

(128,183)

(389,364)

FINANCING ACTIVITIES:

Decrease in short-term debt, net

(40)

(1,089)

Proceeds from issuances of long-term debt

1,754,300

6,277,600

Payments on long-term debt

(2,217,305)

(6,199,793)

Cash paid for debt issuance costs

(18,296)

(20,102)

Payments on finance lease obligations

(7,424)

(4,151)

Issuances of non-recourse notes payable

10,805,546

11,786,432

Payments on non-recourse notes payable

(10,654,011)

(10,708,564)

Repurchase and retirement of common stock

(229,938)

(567,747)

Equity issuances

143,148

124,397

NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES

(424,020)

686,983

Increase in cash, cash equivalents, and restricted cash

115,557

61,013

Cash, cash equivalents, and restricted cash at beginning of year

656,390

595,377

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF YEAR

$

771,947

$

656,390

View source version on businesswire.com: https://www.businesswire.com/news/home/20210401005181/en/

CONTACT: Investors: Stacy Frole, Vice President, Investor Relations investor_relations@carmax.com, (804) 747-0422 x7865

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