CarMax Revs Its Engine: Fool by Numbers

On Sept. 20, 2006, automotive dealership and Inside Value recommendation CarMax (NYSE: KMX  ) released its second-quarter earnings for the period ending Aug. 26, 2006.

• CarMax restated its results for last year's quarter to account for SFAS 123R (that's the new rules on accounting for stock options).
• It's always nice to see margins expand. That means the company is making a little more money on each sale today than it did yesterday.
• Cash flow from operations was down due to increased investments in working capital.

(Figures in millions, except per-share data)

Income Statement Highlights

	Avg. Est.	Q2 2007	Q2 2006	Change
Sales	$1,855	$1,930	$1,634	18.1%
Net Profit	--	$54	$38	44.4%
EPS	$0.41	$0.50	$0.35	42.9%
Diluted Shares		108	106	1.3%

Get back to basics with a look at the income statement.

Margin Checkup

	Q2 2007	Q2 2006	Change*
Gross Margin	13.13%	12.77%	0.36
Operating Margin	4.66%	3.73%	0.93
Net Margin	2.81%	2.30%	0.51

*Expressed in percentage points.

Margins are the earnings engine. See how they work.

Balance Sheet Highlights

Assets	Q2 2007	Q2 2006	Change
Cash + ST Invest.	$24	$42	(43.1%)
Accounts Rec.	$257	$220	16.7%
Inventory	$734	$585	25.5%

Liabilities	Q2 2007	Q2 2006	Change
Accounts Payable	$190	$148	28.2%
Long-Term Debt	$34	$35	(2.8%)

Learn the ways of the balance sheet.

Cash Flow Highlights

	Q2 2007	Q2 2006	Change
Cash From Ops.	$87	$117	(25.6%)
Capital Expenditures	$51	$37	37.3%
Free Cash Flow	$36	$80	(54.8%)

Find out why Fools always follow the money.

Related Companies:

• AutoNation (NYSE: AN  )
• Asbury Automotive Group (NYSE: ABG  )
• Lithia Motors (NYSE: LAD  )
• Group 1 Automotive (NYSE: GPI  )

Related Foolishness:

• Foolish Forecast: Reading CarMax's Manual
• CarMax Maxes Out Earnings
• Foolish Forecast: CarMax Pulls In
• CarMax Hits the Skids

Inside Value lead analyst Philip Durell thinks CarMax is a bargain. To find out why, come take a free trial of the newsletter.

Fool by Numbers is designed to give you the raw earnings information in a timely fashion, putting all the numbers you need in one easy-to-read place. But at The Motley Fool, we believe numbers tell only part of the story, so checkFool.com for more of our in-depth discussion of what the numbers mean.

At the time of publication, David Meier did not own shares in any of the companies mentioned. Fool rules for disclosure are here.