FY14 ARS Complete Annual Report.pdf - CARMAX INC Annual Report Fiscal Year 2014 CarMax Used Car Superstores Alabama Birmingham Dothan Huntsville Arizona

FY14 ARS Complete Annual Report.pdf - CARMAX INC Annual...

This preview shows page 1 out of 92 pages.

You've reached the end of your free preview.

Want to read all 92 pages?

Unformatted text preview: CARMAX, INC. Annual Report Fiscal Year 2014 CarMax Used Car Superstores Alabama Birmingham Dothan* Huntsville Arizona Phoenix (2) Tucson Florida Kansas Nevada Oregon Ft. Myers (2) Jacksonville (2) Miami (5) Orlando (2) Tampa (2) Kansas City (2) Wichita Las Vegas (2) Reno* Portland* (2) Kentucky New Mexico Lexington Louisville Albuquerque Lancaster* (2) Philadelphia (2) New York South Carolina Louisiana Rochester* Charleston Columbia Greenville Georgia Atlanta (5) Augusta Columbus Savannah California Bakersfield Fresno Los Angeles (10) Sacramento (4) San Diego (2) Baton Rouge Illinois Mississippi Chicago (8) Indiana Jackson Tupelo* Colorado Springs Denver (2) Indianapolis Missouri Iowa St. Louis (2) Connecticut Des Moines Nebraska Colorado Charlotte (4) Greensboro (2) Raleigh* (3) North Attleborough Hartford /New Haven (2) Charlottesville Harrisonburg Lynchburg* Norfolk / Virginia Beach (2) Richmond (2) Spokane* Chattanooga Jackson Knoxville Memphis Nashville (3) Cincinnati Cleveland* Columbus (2) Dayton Virginia Washington Tennessee Ohio Washington, D.C. / Baltimore (9) Wisconsin Madison* Milwaukee (2) Texas Austin (2) Dallas / Fort Worth* (5) Houston (5) San Antonio (2) Oklahoma Omaha Salt Lake City Pennsylvania North Carolina Massachusetts Utah Oklahoma City Tulsa *Opening in fiscal 2015 (including one store each in Dallas, Lancaster and Raleigh) CARMAX MARKETS ` Existing Markets ` Opening in Fiscal 2015 13.5% 13.1% 14.4% 11.8% 14.1% $492.6 $434.3 1 1 5 $277.8 $413.8 $377.5 12 10 447,728 408,080 396,181 357,129 $10.96 $10.00 $7.47 $8.98 $12.57 526,929 (Size of markers is based on number of CarMax stores in each market) 10 11 12 13 14 10 11 12 13 14 10 11 12 13 14 10 11 12 13 14 10 11 12 13 14 Total Revenues Used Vehicles Sold Comparable Store Used Unit Sales Net Earnings Return on Invested Capital (in billions) (percentage change) (in millions) (unleveraged, excluding non-recourse debt) Letter to Shareholders During fiscal 2014, we celebrated our 20th anniversary. CarMax was created in 1993 to address a strong consumer need for a better way to buy used cars. Since opening our first store in Richmond, Virginia, we’ve sold more than 5 million retail vehicles and expanded to 133 stores nationwide. We opened 13 stores in fiscal 2014 – our most in any one year. We anticipate a similar schedule of store openings for the next two years as we continue to fill in our national footprint. We were pleased this year to report double-digit growth in our estimated market share. Our data indicates that we grew share by 16% in the age 0 -10 used vehicle market. During fiscal 2014, total revenues increased 15% to $12.6 billion. We sold more than 877,000 vehicles, including nearly 535,000 retail vehicles and more than 342,000 wholesale vehicles at our auctions. Our comparable store used unit sales growth of 12% was our strongest since fiscal 2002. CarMax Auto Finance (CAF) income increased by 12% to approximately $336 million and our loan portfolio grew to more than $7 billion by year end. Net earnings rose 13% to $492.6 million or $2.16 per diluted share. Superior Customer Experience As we accelerated our store openings this year, we continued our focus on enhancing the customer experience – both online and in our stores. Our carmax.com website and mobile apps are essential tools used to drive customer traffic, and we continue to enrich their functionality to meet customer needs. This year we added more personalized elements, improved the search capabilities, redesigned the vehicle listings to be more impactful and scannable, added larger high definition photos with zoom capabilities, and enabled shoppers to make online appointments and hold cars for up to seven days. Our web visits are measures of consumer interest in CarMax, and we believe increasing numbers of our customers are starting with us online. For the full year, our website visits grew to an average of approximately 12 million per month, increasing more than 32% from the previous year. By the end of fiscal 2014, visits to our mobile site represented 30% of total visits, while visits utilizing our mobile apps more than doubled compared with a year earlier - to more than 12% of our online traffic. In fact, by the end of fiscal 2014, 57% of our online traffic came from devices other than desktops or laptops. While many customers start their search for the perfect vehicle online, our stores remain critical to the sales process. Many elements of the car-buying process, including test drives, financing and the completion of final paperwork, are still best handled at a store, with the assistance of well-trained associates. We continue to refine our recent store redesign, which includes greater utilization of technology and touch screen search capabilities, as well as other processes that elevate the customer experience, such as having all cars on the display lot unlocked and available for browsing and giving customers the option of test driving vehicles on their own. During fiscal 2014, we also added 3 new wholesale auction sites, which are now conducted at 60 of our used car superstores. Since our inception, we’ve sold nearly 3 million wholesale vehicles at our auctions. Each year we continue to add more functionality to carmaxauctions.com, which allows dealers to manage their own accounts and provides them with a sneak-preview of our nationwide wholesale inventory, including photographs and vehicle history reports. Wholesale customers also can receive email alerts when specific vehicles become available at an upcoming auction. Financial Highlights % Change (Dollars in millions except per share data) Fiscal Years Ended February 28 or 29 ‘14 vs. ‘13 2014 2013 2012 2011 2010 Operating Results Net sales and operating revenues 15% $ 12,574.3 $ 10,962.8 $10,003.6 $ 8,975.6 $ 7,470.2 Net earnings 13% $ 492.6 $ 434.3 $ 413.8 $ 377.5 $ 277.8 Diluted net earnings per share 16% $ 2.16 $ 1.87 $ 1.79 $ 1.65 $ 1.24 $ 310.3 $ 235.7 $ 172.6 $ 76.6 $ 22.4 Other Information Capital expenditures 32% Used car superstores, at end of year 11% 131 118 108 103 100 Associates, at end of year 11% 20,171 18,111 16,460 15,565 13,439 1 CarMax Fiscal 2014 Smart Growth and Associate Engagement As we continue to grow, we know it’s essential to be smart about how we grow. We remain committed to the CarMax culture of continuous improvement. During fiscal 2014, we began testing a small format store, designed to allow us to economically enter smaller markets. The small format store also represents an ideal environment in which to test and develop more efficient ways of buying and selling vehicles. We opened our first two small format stores in Harrisonburg, Virginia and Jackson, Tennessee. In these stores, our focus on teamwork is particularly important, as associates handle multiple aspects of a customer’s transaction. In the small format environment and elsewhere throughout the company, we continue to search for scalable solutions. We are delighted to have been named by Fortune magazine as one of its “100 Best Companies to Work For” for the tenth consecutive year. This honor is a testament to our continuous focus on a culture of integrity, diversity and respect, where associates have the opportunity to build fulfilling careers. Comprehensive and relevant training – online and in a classroom setting – are key to CarMax’s success. For the seventh consecutive year, CarMax was named to Training magazine’s Top 125, which recognizes organizations that provide extraordinary employer-sponsored workforce training and development programs. We are very proud of programs like the recently introduced Summit, which immerse entry-level managers into leadership development by having them work closely with other experienced managers. Not only does the program teach managers specific skills, it also incorporates nonprofit community service into the workshop. CarMax Cares Giving back to the communities in which we live and work is an integral part of the CarMax culture, and in fiscal 2014, The CarMax Foundation celebrated 10 years of making a positive impact in our communities. Established in 2003, the Foundation has evolved and expanded, and it had another record year in fiscal 2014. Annual grants totaled $4.7 million, and the Foundation surpassed $19 million in total giving since its formation. In addition, 100% of our locations organized at least one volunteer team builder and we held a record 729 total volunteer events during fiscal 2014. As we grow and enter new markets, it’s important to demonstrate that CarMax will be an active and giving member of our new communities. The Foundation partners with the leadership teams in new stores to help them organize community volunteer projects before the store even opens. In fiscal 2014, more than 165 associates in newly opened stores participated in volunteer events prior to the grand opening of their location. Recently, CarMax associates identified Children’s Healthy Living as the Foundation’s national focus. This year we committed to a three-year, $4.1 million partnership with the nationally recognized non-profit KaBOOM!. This organization targets communities in need of safe, accessible places for children to play, with the goal of ensuring that all children get the balance of active play they need to become healthy and successful adults. KaBOOM! doesn’t just build playgrounds, it empowers, connects and strengthens communities. CarMax is proud that our partnership to fund and build 30 playgrounds (7 of which were completed in fiscal 2014) will impact more than 100,000 children. Thank you CarMax has a tremendous opportunity for growth in the years to come. We’re currently in markets that comprise less than 60% of the U.S. population, and in many of those markets we’re not yet fully stored. Evolution and innovation are critical to our long-term competitive position, so we’re continuously refining our business model and continuously getting better. But it is the engagement and skill of our associates that will ultimately drive our success. Once again this year, let me take this opportunity to thank each and every one of our more than 20,000 associates for everything they do every day to support and drive our future. And, we also thank all our customers, communities and shareholders for their support and confidence in CarMax. Tom Folliard President and Chief Executive Officer April 25, 2014 CarMax Fiscal 2014 2 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended February 28, 2014 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 to For the transition period from Commission File Number: 1-31420 CARMAX, INC. (Exact name of registrant as specified in its charter) VIRGINIA 54-1821055 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 12800 TUCKAHOE CREEK PARKWAY, RICHMOND, VIRGINIA 23238 (Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code: (804) 747-0422 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Common Stock, par value $0.50 New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No 1 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer Non-accelerated filer (do not check if a smaller reporting company) Accelerated filer Smaller reporting company Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No The aggregate market value of the registrant’s common stock held by non-affiliates as of August 31, 2013, computed by reference to the closing price of the registrant’s common stock on the New York Stock Exchange on that date, was $10,621,543,601. On March 31, 2014, there were 220,805,697 outstanding shares of CarMax, Inc. common stock. DOCUMENTS INCORPORATED BY REFERENCE Portions of the CarMax, Inc. Notice of 2014 Annual Meeting of Shareholders and Proxy Statement are incorporated by reference in Part III of this Form 10-K. 2 CARMAX, INC. FORM 10-K FOR FISCAL YEAR ENDED FEBRUARY 28, 2014 TABLE OF CONTENTS Page No. PART I 4 Item 1. Business Item 1A. Risk Factors 12 Item 1B. Unresolved Staff Comments 17 Item 2. Properties 18 Item 3. Legal Proceedings 19 Item 4. Mine Safety Disclosures 20 PART II Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 21 Item 6. Selected Financial Data 23 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 24 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 39 Item 8. Consolidated Financial Statements and Supplementary Data 40 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 76 Item 9A. Controls and Procedures 76 Item 9B. Other Information 76 PART III Item 10. Directors, Executive Officers and Corporate Governance 76 Item 11. Executive Compensation 77 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 78 Item 13. Certain Relationships and Related Transactions and Director Independence 78 Item 14. Principal Accountant Fees and Services 78 PART IV Item 15. Exhibits and Financial Statement Schedules 78 Signatures 79 3 PART I In this document, “we,” “our,” “us,” “CarMax” and “the company” refer to CarMax, Inc. and its wholly owned subsidiaries, unless the context requires otherwise. FORWARD-LOOKING AND CAUTIONARY STATEMENTS This Annual Report on Form 10-K and, in particular, the description of our business set forth in Item 1 and our Management’s Discussion and Analysis of Financial Condition and Results of Operations set forth in Item 7 contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements regarding: Our projected future sales growth, comparable store unit sales growth, margins, earnings, CarMax Auto Finance income and earnings per share. Our expectations of factors that could affect CarMax Auto Finance income. Our expected future expenditures, cash needs and financing sources. The projected number, timing and cost of new store openings. Our sales and marketing plans. Our assessment of the potential outcome and financial impact of litigation and the potential impact of unasserted claims. Our assessment of competitors and potential competitors. Our assessment of the effect of recent legislation and accounting pronouncements. In addition, any statements contained in or incorporated by reference into this report that are not statements of historical fact should be considered forward-looking statements. You can identify these forward-looking statements by use of words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “outlook,” “plan,” “predict,” “should,” “will” and other similar expressions, whether in the negative or affirmative. We cannot guarantee that we will achieve the plans, intentions or expectations disclosed in the forward-looking statements. There are a number of important risks and uncertainties that could cause actual results to differ materially from those indicated by our forward-looking statements. These risks and uncertainties include, without limitation, those set forth in Item 1A under the heading “Risk Factors.” We caution investors not to place undue reliance on any forward-looking statements as these statements speak only as of the date when made. We disclaim any intent or obligation to update any forward-looking statements made in this report. Item 1. Business. BUSINESS OVERVIEW CarMax Background. CarMax, Inc. was incorporated under the laws of the Commonwealth of Virginia in 1996. CarMax, Inc. is a holding company and our operations are conducted through our subsidiaries. Our home office is located at 12800 Tuckahoe Creek Parkway, Richmond, Virginia. Under the ownership of Circuit City Stores, Inc. (“Circuit City”), we began operations in 1993 with the opening of our first CarMax superstore in Richmond, Virginia. On October 1, 2002, the CarMax business was separated from Circuit City through a tax-free transaction, becoming an independent, publicly traded company. CarMax Business. We operate in two reportable segments: CarMax Sales Operations and CarMax Auto Finance (“CAF”). Our CarMax Sales Operations segment consists of all aspects of our auto merchandising and service operations, excluding financing provided by CAF. Our CAF segment consists solely of our own finance operation that provides vehicle financing through CarMax superstores. CarMax Sales Operations: We are the nation’s largest retailer of used cars, based on the 526,929 used vehicles we retailed during the fiscal year ended February 28, 2014. As of the end of fiscal 2014, we operated 131 used car 4 superstores in 64 metropolitan markets. In addition, we are one of the nation’s largest wholesale vehicle auction operators, based on the 342,576 wholesale vehicles we sold through our on-site auctions in fiscal 2014. We were the first used vehicle retailer to offer a large selection of high quality used vehicles at low, “no-haggle” prices using a customer-friendly sales process in an attractive, modern sales facility. Our consumer offer allows customers to shop for vehicles the same way they shop for items at other “big-box” retailers. We provide low, nohaggle prices; a broad selection of CarMax Quality Certified vehicles; and superior customer service. Our strategy is to revolutionize the auto retailing market by addressing the major sources of customer dissatisfaction with traditional auto retailers and to maximize operating efficiencies through the use of standardized operating procedures and store formats enhanced by sophisticated, proprietary management information systems. Our consumer offer enables customers to evaluate separately each component of the sales process, including the purchase of a vehicle, the financing of that vehicle, the purchase of extended service plans for that vehicle and the sale of the customer’s current vehicle to CarMax. Customers can make informed decisions based on comprehensive information about th...
View Full Document

  • Winter '20
  • Sales, CarMax Auto Finance, CarMax, Used Vehicles

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

Stuck? We have tutors online 24/7 who can help you get unstuck.
A+ icon
Ask Expert Tutors You can ask You can ask You can ask (will expire )
Answers in as fast as 15 minutes