CarMax 2013 Annual Report Download - page 55

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AUTO LOAN RECEIVABLES, NET
As of February 28 or 29
(In millions) 2013 2012
Warehouse facilities $ 792.0 $ 553.0
Term securitizations 4,989.7 4,211.8
Other receivables (1) 151.6 217.0
Total ending managed receivables 5,933.3 4,981.8
Accrued interest and fees 24.9 23.1
Other (5.0) (1.8)
Less allowance for loan losses (57.3) (43.3)
Auto loan receivables, net $ 5,895.9 $ 4,959.8
(1) Other receivables includes receivables not funded through the warehouse facilities or term securitizations.
Credit Quality. When customers apply for financing, CAF uses proprietary scoring models that rely on the
customers’ credit history and certain application information to evaluate and rank their risk. Credit histories are
obtained from credit bureau reporting agencies and include information such as number, age, type of and payment
history for prior or existing credit accounts. The application information that is used includes income, collateral
value and down payment. Our scoring models yield credit grades that represent the relative likelihood of repayment.
Customers assigned a grade of “A” are determined to have the highest probability of repayment, and customers
assigned a lower grade are determined to have a lower probability of repayment. For loans that are approved, the
credit grade influences the terms of the agreement, such as the required loan-to-value ratio and interest rate.
CAF uses a combination of the initial credit grades and historical performance to monitor the credit quality of the
auto loan receivables on an ongoing basis. We validate the accuracy of the scoring models periodically. Loan
performance is reviewed on a recurring basis to identify whether the assigned grades adequately reflect the
customers’ likelihood of repayment.
ENDING MANAGED RECEIVABLES BY MAJOR CREDIT GRADE
As of February 28 or 29
(In millions) 2013 (1) % (2) 2012 (1) % (2)
A $ 2,841.4 47.9 $ 2,452.8 49.2
B 2,265.6 38.2 1,923.6 38.6
C and other 826.3 13.9 605.4 12.2
Total ending managed receivables $ 5,933.3 100.0 $ 4,981.8 100.0
(1) Classified based on credit grade assigned when customers were initially approved for financing.
(2) Percent of total ending managed receivables.
ALLOWANCE FOR LOAN LOSSES
As of February 28 or 29
(In millions)
2013 % (1) 2012 % (1)
Balance as of beginning of year $ 43.3 0.9
$ 38.9 0.9
Charge-offs (103.1) (92.7)
Recoveries
60.9 60.7
Provision for loan losses 56.2 36.4
Balance as of end of year $ 57.3 1.0
$ 43.3 0.9
(1) Percent of total ending managed receivables as of the corresponding reporting date.
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
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