CarMax 2008 Annual Report Download - page 42

30
In fiscal 2009, we also plan to expand our car-buying center test with the opening of our fourth and fifth centers, in
Dallas, Texas, (opened April 2008) and in Baltimore, Maryland. We will continue to evaluate the performance of
these five centers before deciding whether to open additional centers in future years.
We currently estimate gross capital expenditures will total approximately $350 million in fiscal 2009. Planned
expenditures primarily relate to new store construction and land purchases associated with future year store
openings, as well as the reconditioning capacity expansions. Compared with the $253 million spent in fiscal 2008,
the fiscal 2009 capital spending estimate reflects an increase in land purchases to support future year store openings
and the increase in the number of stores planned to be opened.
Fiscal 2009 Expectations
The fiscal 2009 expectations discussed below are based on historical and current trends in our business and should
be read in conjunction with “Risk Factors,” in Part I, Item 1A of this Form 10-K.
Fiscal 2009 Sales. We currently anticipate the change in comparable store used unit sales in the range of (2%) to
5% in fiscal 2009. The wide range reflects an expectation of continued softness in the economy and volatility in the
market for late-model used cars. We expect total revenues to increase between 7% and 14%, reflecting our planned
new store openings, the comparable store sales performance and anticipated declines in both used vehicle average
selling prices and new car revenues.
We are not anticipating any material change in credit availability for our customers in fiscal 2009, despite the fact
that AmeriCredit Corp. is no longer one of our third-party financing providers effective April 1, 2008. We
anticipate the majority of loans previously financed by AmeriCredit will be financed by other third-party providers.
Fiscal 2009 Earnings Per Share. We currently expect fiscal 2009 earnings per share in the range of $0.78 to $0.94.
The width of this range reflects the uncertainty of current market conditions, especially in the credit markets. We
expect to maintain our used and wholesale gross profit dollars per unit at levels similar to those in fiscal 2008.
We currently believe the CAF gain percentage on loans originated and sold in fiscal 2009 could be well below the
normalized range of 3.5% to 4.5% reflecting the continued use of a 17% discount rate in calculating the gain on
loans sold, and our expectations that funding costs and cumulative net loss rates will remain at higher-than-normal
levels due to the stresses of the current economy.
We are anticipating that the disruption in the credit markets will continue to adversely affect CAF income
throughout fiscal 2009 relative to historical norms. In addition, based on the funding cost spreads achieved in recent
comparable public securitizations, we estimate that CAF will have to absorb approximately $14 million of
incremental funding costs upon the refinancing of the $855 million that was outstanding in the warehouse facility to
the end of fiscal 2008.
Our fiscal 2009 earnings estimates also reflect an expected increase in our SG&A ratio. The combination of the
anticipated comparable store sales performance and the decline in used vehicle average selling prices, together with
continued investments supporting our growth plan, will likely cause the SG&A ratio to increase in fiscal 2009.
We expect average outstanding debt will rise in fiscal 2009, which will increase our interest expense. The higher
debt levels primarily relate to planned capital spending, as well as the prospect of continuing to retain some
subordinated bonds in connection with future CAF securitizations.
RECENT ACCOUNTING PRONOUNCEMENTS
For a discussion of recent accounting pronouncements applicable to CarMax, see Note 16.
FINANCIAL CONDITION
Liquidity and Capital Resources
Operating Activities. We generated net cash from operating activities of $79.5 million in fiscal 2008, $136.8
million in fiscal 2007 and $117.5 million in fiscal 2006. Cash generated by operating activities was $57.3 million
lower in fiscal 2008 compared with fiscal 2007. The decrease resulted from a higher level of working capital
investment in fiscal 2008, combined with the $16.6 million decrease in net earnings. Our retained interest in
securitized receivables increased by $68.5 million in fiscal 2008 reflecting our decision to retain the $44.7 million