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CarMax Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: October 7, 2011 01:31PM
CarMax Inc. (KMX) filed Quarterly Report for the period ended 2011-08-31. Carmax Inc. has a market cap of $5.67 billion; its shares were traded at around $25.07 with a P/E ratio of 14.2 and P/S ratio of 0.6. Carmax Inc. had an annual average earning growth of 5.4% over the past 10 years.
Highlight of Business Operations:For the first half of the fiscal year, other gross profit fell 4% to $104.0 million from $108.7 million in fiscal 2011. Other gross profit per unit declined $39 to $482 per unit compared with $521 per unit in the prior year period. The decrease in other gross profit for the six-month period primarily resulted from a $9.5 million decline in service department gross profit, most of which occurred during the second quarter. The decline in service department gross profit was partially offset by an improvement in ESP and GAP gross profits resulting from the increase in the related revenues during the first half of fiscal 2012.
Financing Activities. During the first half of the fiscal year, $296.6 million of net cash was provided by financing activities in fiscal 2012 compared with $67.2 million in fiscal 2011. The net cash provided by financing activities included increases in total non-recourse notes payable of $284.9 million in fiscal 2012 and $180.6 million in fiscal 2011, which were used to provide the financing for the majority of the increases of $388.3 million and $228.9 million, respectively, in auto loan receivables. During the first half of fiscal 2011, net cash used in financing activities included a $122.3 million net reduction in outstanding borrowings under the revolving credit facility and capital leases.
New Vehicle Gross Profit. Our new vehicle gross profit increased to $1.7 million in the second quarter of fiscal 2012 and $3.1 million in the first half of fiscal 2012, from $1.2 million and $2.7 million, respectively, in the corresponding prior year periods. The improvement in gross profit in both periods was primarily the result of an increase in gross profit per unit, which benefited from a reduction in discounting by new car manufacturers and dealers following the Japanese earthquake.
Restricted cash from collections on auto loan receivables decreased $6.1 million in the first half of fiscal 2012 compared with a $4.0 million increase in the first half of fiscal 2011. These collections may vary from month to month depending on the timing of the receipt of principal and interest payments on securitized auto loan receivables.
The allowance for loan losses represents an estimate of the amount of net losses inherent in our portfolio of managed receivables as of the applicable reporting date and anticipated to occur during the following 12 months. The allowance is primarily based on the credit quality of the underlying receivables, historical loss trends and forecasted forward loss curves. We also take into account recent trends in delinquencies and losses, recovery rates and the economic environment. The provision for loan losses is the periodic expense of maintaining an adequate allowance. The allowance for loan losses was initially established as of March 1, 2010, in connection with the adoption of new accounting rules related to securitizations.
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