CarMax (KMX) witnessed a net income of $103 million or 46 cents per share in the second quarter of fiscal 2010 ended August 31, 2009. This was a staggering rise from the Zacks Consensus Estimate of 18 cents per share and $14 million or 6 cents per share reported in the second quarter of fiscal 2009.
Healthy increases in both used and wholesale vehicle unit sales triggered the rise in profits. Net sales and operating revenues rose 13% to $2.08 billion from $1.84 billion in the second quarter of last fiscal year. Comparable store used unit sales went up 8% for the quarter. Wholesale unit sales increased 5% year-over-year, while total used unit sales rose 10% in the second quarter. The Government’s “Cash for Clunkers” program, which resulted in a spike in sales since its inception in July and August, had a beneficial effect on the company’s sales.
Total gross profit surged 23% to $314.5 million from $255.9 million in the second quarter of the previous fiscal year, reflecting the combination of the increase in unit sales and an improvement in total gross profit dollars per retail unit, which increased $363 per unit to $3,116 in the second quarter from $2,753 in the comparable quarter a year ago.
Performance of CarMax Auto Finance (CAF)
CAF reported an income of $72.1 million compared with a loss of $7.1 million in the prior-year quarter. In both the periods, CAF results were affected by adjustments related to loans originated in previous fiscal periods. In the second quarter of fiscal 2010, the adjustments increased CAF income by $36.2 million. Excluding these adjustments, CAF income increased to $36 million in the second quarter of fiscal 2010, from $21 million in the second quarter of fiscal 2009.
Credit Facilities
As of August 31, 2009, CarMax had a net debt of $257.2 million, consisting of $351.1 million outstanding under the revolving credit facility and $28.4 million of capitalized leases, net of $122.3 million of cash and cash equivalents. As of that date, based on then-current inventory levels, the company had additional borrowing capacity of $245.6 million under the revolving credit facility, which expires in December 2011.
Financial Position
CarMax had cash and cash equivalents of $122 million on August 31, 2009. Long-term debt amounted to $178 million as of that date. The long-term debt-to-capitalization ratio stood at 18%.
In the first half of 2009, CarMax had a net cash outflow from operating activities of $51 million. Meanwhile, capital expenditures totaled $14 million during the same period.
We continue to recommend the shares of CarMax as Neutral.
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