News Column

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

July 8, 2014

The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is provided as a supplement to, and should be read in conjunction with, our audited consolidated financial statements, the accompanying notes and the MD&A included in our Annual Report on Form 10-K for the fiscal year ended February 28, 2014 ("fiscal 2014"), as well as our consolidated financial statements and the accompanying notes included in Item 1 of this Form 10-Q. Note references are to the notes to consolidated financial statements included in Item 1. All references to net earnings per share are to diluted net earnings per share. Amounts and percentages may not total due to rounding.

In this discussion, "we," "our," "us," "CarMax," "CarMax, Inc." and "the company" refer to CarMax, Inc. and its wholly owned subsidiaries, unless the context requires otherwise.

BUSINESS OVERVIEW



CarMax is the nation's largest retailer of used vehicles. 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.

We pioneered the used car superstore concept, opening our first store in 1993. 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. As of May 31, 2014, we operated 135 used car superstores in 67 markets, comprising 48 mid-sized markets, 15 large markets and 4 small markets. We define mid-sized markets as those with television viewing populations generally between 600,000 and 2.5 million people. We also operated four new car franchises. During fiscal 2014, we sold 526,929 used cars, representing 99% of the total 534,690 vehicles we sold at retail.

We believe the CarMax consumer offer is distinctive within the auto retailing marketplace. Our offer provides customers the opportunity to shop for vehicles the same way they shop for items at other big box retailers. Our consumer offer features low, no­haggle prices; a broad selection of CarMax Quality Certified used vehicles; and superior customer service. Our website, carmax.com, and related mobile apps are valuable tools for communicating the CarMax consumer offer, as well as sophisticated search engines and efficient channels for customers who prefer to start their shopping online. Our financial results are driven by retailing used vehicles and associated items including vehicle financing, extended protection plan ("EPP") products and vehicle repair service. EPP products include extended service plans ("ESPs") and guaranteed asset protection ("GAP"), which is designed to cover the unpaid balance on an auto loan in the event of a total loss of the vehicle or unrecovered theft.

We seek to build customer satisfaction by offering high-quality retail vehicles. Fewer than half of the vehicles acquired from consumers through the appraisal purchase process meet our standards for reconditioning and subsequent retail sale. Those vehicles that do not meet our standards are sold through on-site wholesale auctions. Vehicles repossessed and liquidated by CAF are also generally sold through our wholesale auctions. Wholesale auctions are generally held on a weekly or bi-weekly basis, and as of May 31, 2014, we conducted auctions at 61 used car superstores. During fiscal 2014, we sold 342,576 wholesale vehicles. On average, the vehicles we wholesale are approximately 10 years old and have more than 100,000 miles. Participation in our wholesale auctions is restricted to licensed automobile dealers, the majority of whom are independent dealers and licensed wholesalers.

We sell EPPs on behalf of unrelated third parties who are the primary obligors. EPP revenue represents commissions earned on the sale of ESPs and GAP from the unrelated third parties.

We provide financing to qualified retail customers through CAF and our arrangements with several industry-leading financial institutions. Depending on the credit profile of the customer, the third-party finance providers generally either pay us or are paid a fixed, pre-negotiated fee per contract. The fee amount is independent of any finance term offered to the customer; it does not vary based on the amount financed, the term of the loan, the interest rate or the loan-to-value ratio. We refer to the providers who pay us a fee as prime and nonprime providers, and we refer to the providers to whom we pay a fee as subprime

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providers. We periodically test additional third-party providers. We have no recourse liability for credit losses on retail installment contracts arranged with third-party providers.

We offer financing through CAF to qualified customers purchasing vehicles at CarMax. CAF utilizes proprietary customized scoring models based upon the credit history of the customer, along with CAF's historical experience, to predict the likelihood of customer repayment. CAF offers customers an array of competitive rates and terms, allowing them to choose the ones that best fit their needs. In addition, customers are permitted to refinance or pay off their contract with CAF or a third-party provider within three business days of a purchase without incurring any finance or related charges. We test different credit offers and closely monitor acceptance rates, 3-day payoffs and the effect on sales to assess market competitiveness. After the effect of 3­day payoffs and vehicle returns, CAF financed 41.3% of our retail vehicle unit sales in the first three months of fiscal 2015. As of May 31, 2014, CAF serviced approximately 555,000 customer accounts in its $7.57 billion portfolio of managed receivables.

Over the long term, we believe the primary driver for earnings growth will be vehicle unit sales growth from both new stores and stores included in our comparable store base. We also believe that increased used vehicle unit sales will drive increased sales of wholesale vehicles and ancillary products and, over time, increased CAF income. We target a dollar range of gross profit per used unit sold. The gross profit dollar target for an individual vehicle is based on a variety of factors, including its probability of sale and its mileage relative to its age; however, it is not primarily based on the vehicle's selling price.

We currently plan to open 13 superstores in fiscal 2015 and between 10 and 15 superstores in each of the following two fiscal years. While we currently have more than 130 superstores, we are still in the midst of the national rollout of our retail concept, and as of May 31, 2014, we had used car superstores located in markets that comprised approximately 58% of the U.S. population.

The principal challenges we face in expanding our store base include our ability to hire qualified associates and build our management bench strength to support our store growth, and our ability to procure suitable real estate at favorable terms. We staff each newly opened store with associates who have extensive CarMax training. Therefore, we must recruit, train and develop managers and associates to fill the pipeline necessary to support future store openings.

Fiscal 2015 First Quarter Highlights

§ Net sales and operating revenues increased 13.3% to $3.75 billion from

$3.31 billion in the first quarter of fiscal 2014. Net earnings grew 15.7% to $169.7 million from $146.7 million in the prior year period, while net earnings per diluted share grew 18.8% to $0.76, compared with $0.64 in the prior year period.



§ Used vehicle revenues increased 13.3% to $3.06 billion from $2.70 billion in

the first quarter of fiscal 2014. Total used vehicle unit sales rose 9.8%, reflecting the combination of a 3.4% increase in comparable store used unit sales and sales from newer stores not yet included in the comparable store base.



§ Wholesale vehicle revenues increased 11.1% to $545.2 million from

$490.7 million in the first quarter of fiscal 2014. Wholesale unit sales rose 9.9%, reflecting increased appraisal traffic and a stronger wholesale buy rate, as well as the growth in our store base.



§ Other sales and revenues increased 13.0% to $74.8 million from $66.2 million in

the first quarter of fiscal 2014, primarily reflecting an improvement in net third-party finance fees resulting from a decrease in the percentage of sales financed by our third-party subprime providers.



§ Total gross profit increased 12.0% to $501.7 million compared with

$448.1 million in the first quarter of fiscal 2014, largely reflecting the

increases in used and wholesale vehicle unit sales.

§ Selling, general and administrative ("SG&A") expenses increased 8.0% to

$313.4 million from $290.2 million in the first quarter of fiscal 2014. The increase primarily reflected the 14.4% increase in our store base since the beginning of last year's first quarter (representing the addition of 17 stores). SG&A expense benefited from a $6.5 million decrease in share-based compensation expense compared with the first quarter of fiscal 2014. SG&A per retail unit declined $39 to $2,047 versus $2,086 in the prior year's quarter.



§ CAF income increased 8.7% to $94.6 million compared with $87.0 million in the

first quarter of fiscal 2014. The improvement resulted from a 20.1% increase in average managed receivables, partially offset by a lower total interest margin rate, which declined to 6.7% of average managed receivables from 7.2% in the prior year quarter.



§ In the first quarter of fiscal 2015, net cash used in operating activities

totaled $209.1 million, compared with $77.6 million in the first quarter of fiscal 2014. These amounts include increases in auto loan receivables of $415.7 Page 25



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million and $425.8 million, respectively. The majority of the increases in auto loan receivables are accompanied by increases in non-recourse notes payable, which are separately reflected as cash provided by financing activities. Excluding the increases in auto loan receivables, net cash provided by operating activities would have been $206.6 million in the first quarter of fiscal 2015 versus $348.2 million in the first quarter of fiscal 2014, with the decrease primarily driven by changes in inventory.

CRITICAL ACCOUNTING POLICIES



For information on critical accounting policies, see "Critical Accounting Policies" in MD&A included in Item 7 of the Annual Report on Form 10-K for the fiscal year ended February 28, 2014. These policies relate to financing and securitization transactions, revenue recognition and income taxes.

RESULTS OF OPERATIONS - CARMAX SALES OPERATIONS

Net Sales And Operating Revenues

Three Months Ended May 31 (In millions) 2014 2013 Change Used vehicle sales $ 3,060.3$ 2,701.8 13.3 % New vehicle sales 69.8 52.4 33.1 % Wholesale vehicle sales 545.2 490.7 11.1 % Other sales and revenues: Extended protection plan revenues 63.7 64.6 (1.4) % Service department sales 28.3 27.4 3.5 % Third-party finance fees, net (17.2) (25.8) 33.2 % Total other sales and revenues 74.8 66.2 13.0 %



Total net sales and operating revenues $ 3,750.2$ 3,311.1 13.3 %

Unit Sales Three Months Ended May 31 2014 2013 % Change Used vehicles 150,528 137,154 9.8 % New vehicles 2,597 1,949 33.2 %



Wholesale vehicles 97,098 88,356 9.9 %

Average Selling Prices Three Months Ended May 31 2014 2013 % Change Used vehicles $ 20,173$ 19,540 3.2 % New vehicles $ 26,761$ 26,788 (0.1) % Wholesale vehicles $ 5,450$ 5,388 1.2 % Vehicle Sales Changes Three Months Ended May 31 2014 2013 Used vehicle units 9.8 % 22.1 % Used vehicle revenues 13.3 % 23.5 % Wholesale vehicle units 9.9 % 5.8 % Wholesale vehicle revenues 11.1 % 4.9 % Page 26



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Comparable store used unit sales growth is one of the key drivers of our profitability. A store is included in comparable store retail sales in the store's fourteenth full month of operation.

Comparable Store Used Vehicle Sales Changes

Three Months Ended May 31 2014 2013 Used vehicle units 3.4 % 16.7 % Used vehicle dollars 6.6 % 18.1 %



Change in Used Car Superstore Base

Three Months Ended May 31 2014 2013 Used car superstores, beginning of period 131 118 Superstore openings 4 3 Used car superstores, end of period 135 121



We opened four stores during the first quarter of fiscal 2015, including three stores in new markets (Rochester, New York; Dothan, Alabama; and Spokane, Washington) and one store in an existing market (Harrisburg/Lancaster, Pennsylvania).

Used Vehicle Sales. The 13.3% increase in used vehicle revenues in the first quarter of fiscal 2015 resulted from a 9.8% increase in used unit sales and a 3.2% increase in average selling price. The increase in used unit sales included a 3.4% increase in comparable store used unit sales and sales from newer stores not yet included in the comparable store base. The comparable store used unit growth was driven by improved customer traffic. Strong industry wholesale pricing in the first quarter of fiscal 2015 increased our vehicle acquisition cost, contributing to the increase in used vehicle average selling price. The percentage of retail vehicles financed by third-party subprime providers, combined with those financed under the previously announced CAF loan origination test, declined from 21.3% in the first quarter of fiscal 2014 to 16.1% in this year's first quarter.

Wholesale Vehicle Sales. Our wholesale auction prices usually reflect the trends in the general wholesale market for the types of vehicles we sell, although they can also be affected by changes in vehicle mix or the average age, mileage or condition of the vehicles bought through our appraisal process and sold in our auctions.

The 11.1% increase in wholesale vehicle revenues in the first quarter of fiscal 2015 resulted from a 9.9% increase in wholesale unit sales and a 1.2% increase in average selling price. Wholesale unit sales benefited from increased appraisal traffic and a stronger wholesale vehicle buy rate, as well as the growth in our store base.

Other Sales and Revenues. Other sales and revenues include commissions on the sale of EPPs, which include ESP and GAP revenues, net of a reserve for estimated customer cancellations; service department sales; and net third-party finance fees. The fixed, per-vehicle fees paid to us by prime and nonprime third-party finance providers may vary, reflecting the providers' differing levels of credit risk exposure. The fixed, per-vehicle fees that we pay to the subprime providers are reflected as an offset to finance fee revenues received from prime and nonprime providers.

Other sales and revenues increased 13.0% in the first quarter of fiscal 2015. EPP revenues declined $0.9 million versus the corresponding prior period level reflecting an increase in the cancellation reserves for the underlying products and a modest reduction in the ESP penetration rate, partially offset by the growth in total retail sales. Net third-party finance fees improved $8.6 million versus last year's first quarter primarily due to the reduction in the percentage of sales financed by third-party subprime providers. In fiscal 2014 and fiscal 2013, the volume and share of financings originated by the third-party subprime providers increased, as these providers made more attractive offers. Late in the third quarter of fiscal 2014, however, we began to see tightening of the credit terms offered by our third-party subprime providers.

Seasonality. Historically, our business has been seasonal. Typically, our superstores experience their strongest traffic and sales in the spring and summer quarters. Sales are typically slowest in the fall quarter, when used vehicles generally experience proportionately more of their annual depreciation. We believe this is partly the result of a decline in customer traffic, as well as discounts on model year closeouts that can pressure pricing for late-model used vehicles. Customer traffic generally tends to slow in the fall as the weather changes and as customers shift their spending priorities. We typically experience an increase in subprime traffic and sales in February and March, coincident with tax refund season.

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Gross Profit Three Months Ended May 31 (In millions) 2014 2013 Change Used vehicle gross profit $ 334.1$ 303.9 9.9 % New vehicle gross profit 1.8 1.1 71.4 % Wholesale vehicle gross profit 101.6 86.5 17.5 % Other gross profit 64.2 56.6 13.4 % Total $ 501.7$ 448.1 12.0 % Gross Profit Per Unit Three Months Ended May 31 2014 2013 $ per unit(1) %(2) $ per unit(1) %(2)



Used vehicle gross profit $ 2,220 10.9 $ 2,216 11.2 New vehicle gross profit $ 709 2.6 $ 551 2.0 Wholesale vehicle gross profit $ 1,046 18.6 $ 979 17.6 Other gross profit

$ 419 85.8 $ 407 85.5 Total gross profit $ 3,277 13.4 $ 3,221 13.5



(1)Calculated as category gross profit divided by each category's respective units sold, except the other and total categories, which are calculated by dividing their respective gross profit by total retail units sold.

(2)Calculated as a percentage of its respective sales or revenue.

Used Vehicle Gross Profit. Used vehicle gross profit rose 9.9% in the first quarter of fiscal 2015 driven by the increase in used unit sales, while used vehicle gross profit per unit remained comparable with the prior year period.

We have been able to manage to a relatively consistent gross profit per used unit over the last several years.

Wholesale Vehicle Gross Profit. Wholesale vehicle gross profit increased 17.5% versus the first quarter of last year, reflecting the combination of the 9.9% increase in wholesale unit sales and an improvement in wholesale vehicle gross profit per unit, which rose 6.8%, or $67 per unit. The strong industry wholesale pricing contributed to the strong wholesale gross profit per unit.

Other Gross Profit. Other gross profit includes profits related to EPP revenues, net third-party finance fees and service department operations, including used vehicle reconditioning. We have no cost of sales related to EPP revenues or net third-party finance fees, as these represent commissions paid to us by certain third-party providers. Third-party finance fees are reported net of the fees we pay to third-party subprime finance providers. Accordingly, changes in the relative mix of the other gross profit components can affect the composition and amount of total other gross profit.

Other gross profit increased 13.4% in the first quarter of fiscal 2015, reflecting the improvement in net third-party finance fees.

Impact of Inflation. Historically, inflation has not had a significant impact on results. Profitability is primarily affected by our ability to achieve targeted unit sales and gross profit dollars per vehicle rather than by changes in average retail prices. However, increases in average vehicle selling prices benefit CAF income, to the extent the average amount financed also increases.

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Selling, General and Administrative Expenses

Components of SG&A Expense Three Months Ended May 31 (In millions, except per unit data) 2014 2013 Change Compensation and benefits (1) $ 178.9$ 172.1 4.0 % Store occupancy costs 58.3 52.5 11.0 % Advertising expense 30.7 27.1 13.3 % Other overhead costs (2) 45.5 38.5 18.2 % Total SG&A expenses $ 313.4$ 290.2 8.0 % SG&A per unit $ 2,047$ 2,086$ (39)



(1)Excludes compensation and benefits related to reconditioning and vehicle repair service, which is included in cost of sales.

(2)Includes IT expenses, insurance, non-CAF bad debt, travel, preopening and relocation costs, charitable contributions and other administrative expenses.

SG&A expenses increased 8.0% in the first quarter of fiscal 2015 primarily reflecting the 14.4% increase in our store base since the beginning of last year's first quarter (representing the addition of 17 stores). SG&A per retail unit declined $39 to $2,047. SG&A expense in the first quarter of fiscal 2015 benefited from a $6.5 million ($56 per retail unit) decrease in share-based compensation expense compared with the first quarter of fiscal 2014.

Income Taxes. The effective income tax rate was 38.3% in the first quarter of fiscal 2015 versus 38.2% in the corresponding prior year period.

RESULTS OF OPERATIONS - CARMAX AUTO FINANCE INCOME

CAF provides financing to qualified customers purchasing vehicles at CarMax. Because the purchase of a vehicle is generally reliant on the consumer's ability to obtain on-the-spot financing, it is important to our business that financing be available to creditworthy customers. While financing can also be obtained from third-party sources, we believe that total reliance on third parties can create unacceptable volatility and business risk. Furthermore, we believe the company's processes and systems, transparency of pricing, vehicle quality and the integrity of the information collected at the time the customer applies for credit provide a unique and ideal environment in which to procure high quality auto loans, both for CAF and for the third-party finance providers.

We believe CAF enables us to capture additional sales, profits and cash flows while managing our reliance on third-party finance sources. Management regularly analyzes CAF's operating results by assessing the competitiveness of our consumer offer, profitability, the performance of the auto loan receivables including trends in credit losses and delinquencies, and CAF direct expenses.

CAF income primarily reflects the interest and fee income generated by the auto loan receivables less the interest expense associated with the debt issued to fund these receivables, a provision for estimated loan losses and direct CAF expenses. CAF income does not include any allocation of indirect costs. Although CAF benefits from certain indirect overhead expenditures, we present this information on a direct basis to avoid making subjective decisions regarding the indirect benefits or costs that could be attributed to CAF. Examples of indirect costs not allocated to CAF include retail store expenses and corporate expenses such as human resources, administrative services, marketing, information systems, accounting, legal, treasury and executive payroll.

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Components of CAF Income Three Months Ended May 31 (In millions) 2014 % (1) 2013 % (1) Interest margin: Interest and fee income $ 147.0 8.0 $ 133.5 8.7 Interest expense (23.1) (1.2) (22.8) (1.5) Total interest margin 123.9 6.7 110.7 7.2 Provision for loan losses (15.8) (0.9) (11.3) (0.7) Total interest margin after provision for loan losses 108.1 5.8 99.4 6.5 Direct expenses: Payroll and fringe benefit expense (6.2) (0.3) (5.5) (0.4) Other direct expenses (7.3) (0.4) (6.9) (0.4) Total direct expenses (13.5) (0.7) (12.4) (0.8) CarMax Auto Finance income $ 94.6 5.1 $ 87.0 5.7 Total average managed receivables $ 7,390.1$ 6,152.5



(1)Annualized percentage of total average managed receivables.

CAF Origination Information Three Months Ended May 31 (1) 2014 2013



Net loans originated (in millions) $ 1,236.3$ 1,120.2 Vehicle units financed

63,191 57,662 Penetration rate (2) 41.3 % 41.5 % Weighted average contract rate 7.2 % 7.0 % Weighted average term (in months) 65.5 65.7



(1)All information relates to loans originated net of estimated 3-day payoffs and vehicle returns.

(2)Vehicle units financed as a percentage of total retail units sold.

CAF income increased 8.7% to $94.6 million in the first quarter of fiscal 2015. The improvement resulted from the growth in CAF's average managed receivables, partially offset by a lower total interest margin rate.

CAF's average managed receivables increased 20.1% to $7.39 billion in the first quarter of fiscal 2015, driven by the rise in CAF loan originations in recent years. Net loans originated increased 10.4% to $1.24 billion compared with $1.12 billion in the first quarter of fiscal 2014. The rise in originations reflected an overall increase in our retail unit sales. CAF's net penetration rate of 41.3% for the first quarter of fiscal 2015 was similar to the prior year period.

In January 2014, CAF launched a test to originate loans for customers who typically would be financed by our third-party subprime providers. We plan to originate approximately $70 million of loans in this test. As of May 31, 2014, we had originated $29.6 million, of which $20.5 million was originated in the first quarter of fiscal 2015. We expect the loans originated in this test will have higher loss and delinquency rates compared with the remainder of the CAF portfolio. The test is being funded separately from our current portfolio and is not included in our current securitization program.

The effect of the increase in managed receivables on CAF income was partially offset by a lower total interest margin rate, which declined to 6.7% of average managed receivables in the first quarter of fiscal 2015 from 7.2% in the prior year period. The interest margin reflects the spread between interest and fees charged to consumers and our funding costs. While the weighted average contract rate on loan originations rose slightly to 7.2% in the first quarter of fiscal 2015 from 7.0% in the prior year period, the current rate is below that experienced in recent years, largely reflecting competitive conditions and continued low funding costs. Changes in the interest margin on new originations affect CAF income over time as these loans come to represent an increasing percentage of managed receivables. Rising interest rates, which affect CAF's funding costs, or further competitive pressure on consumer rates could result in further compression in the interest margin on new originations.

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The provision for loan losses is the periodic expense of maintaining an adequate allowance for loan losses. In the first quarter, the provision for loan losses as a percentage of average managed receivables increased to 0.86% in fiscal 2015 compared with 0.73% in fiscal 2014.

Allowance for Loan Losses Three Months Ended May 31 (In millions) 2014 % (1) 2013 % (1) Balance as of beginning of year $ 69.9 0.97 $ 57.3 0.97 Charge-offs (32.0) (26.4) Recoveries 21.7 18.7 Provision for loan losses 15.8 11.3 Balance as of end of period $ 75.4 1.00 $ 60.9 0.96



(1)Percentage 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 forward loss curves. We consider recent trends in delinquencies and losses, recovery rates and the economic environment in determining the adequacy of the allowance. The increase in the dollar amount of the allowance largely reflected the growth in managed receivables. The allowance for loan losses as a percentage of managed receivables increased slightly to 1.00% as of May 31, 2014 from 0.96% as of May 31, 2013.

Past Due Account Information

As of May 31 As of February 28 (In millions) 2014 2013 2014 2013 Accounts 31+ days past due $ 190.1$ 154.4$ 185.2$ 154.2 Ending managed receivables $ 7,573.8$ 6,334.7$ 7,184.4$ 5,933.3 Past due accounts as a percentage of ending managed receivables 2.51 % 2.44 % 2.58 % 2.60 % Credit Loss Information Three Months Ended May 31 (In millions) 2014 2013 Net credit losses on managed receivables $ 10.3$ 7.7 Total average managed receivables $ 7,390.1$ 6,152.5 Annualized net credit losses as a percentage of total average managed receivables 0.56 % 0.50 % Average recovery rate 57.8 % 59.2 %



As of May 31, 2014, past due accounts were 2.51% of ending managed receivables, slightly higher than the 2.44% delinquency rate as of May 31, 2013. Net credit losses increased modestly to 0.56% of average managed receivables in the first quarter of fiscal 2015 from 0.50% in the corresponding period of fiscal 2014.

The average recovery rate represents the average percentage of the outstanding principal balance we receive when a vehicle is repossessed and liquidated, generally at our wholesale auctions. The annual recovery rate has ranged from a low of 42% to a high of 60%, and it is primarily affected by changes in the wholesale market pricing environment.

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PLANNED FUTURE ACTIVITIES



Planned Superstore Openings. We plan to open a total of 13 superstores in fiscal 2015 and between 10 and 15 superstores in each of the following two fiscal years. We currently estimate capital expenditures will total approximately $325 million in fiscal 2015.

We currently plan to open the following superstores within 12 months from May 31, 2014: Location Television Market Market Status Planned Opening Date Madison, Wisconsin (1) Madison New Q2 Fiscal 2015 Fort Worth, Texas Dallas Existing Q2 Fiscal 2015 Lynchburg, Virginia Roanoke/Lynchburg New Q2 Fiscal 2015 Milwaukie, Oregon Portland New Q2 Fiscal 2015 Beaverton, Oregon Portland New Q3 Fiscal 2015 Saltillo, Mississippi Tupelo New Q3 Fiscal 2015 Reno, Nevada Reno New Q3 Fiscal 2015 Raleigh, North Carolina Raleigh Existing Q3 Fiscal 2015 Warrensville Heights, Ohio Cleveland New Q4 Fiscal 2015 Brooklyn Park, Minnesota Minneapolis/St Paul New Q1 Fiscal 2016 Sicklerville, New Jersey Philadelphia Existing Q1 Fiscal 2016 Gainesville, Florida Gainesville New Q1 Fiscal 2016 (1)Opened in June 2014.



Normal construction, permitting or other scheduling delays could shift the opening dates of any of these stores into a later period.

FINANCIAL CONDITION



Liquidity and Capital Resources.

Our primary ongoing cash requirements are to fund our existing operations, new superstore expansion (including capital expenditures and inventory purchases) and CAF. Our primary ongoing sources of liquidity include existing cash balances, funds provided by operations, proceeds from securitization transactions or other funding arrangements, and borrowings under our revolving credit facility.

Operating Activities. During the first quarter of the fiscal year, net cash used in operating activities totaled $209.1 million in fiscal 2015 versus $77.6 million in fiscal 2014. These amounts include increases in auto loan receivables of $415.7 million and $425.8 million, respectively. The majority of the increases in auto loan receivables are accompanied by increases in non-recourse notes payable, which are separately reflected as cash provided by financing activities. Excluding the increases in auto loan receivables, net cash provided by operating activities would have been $206.6 million in the first quarter of fiscal 2015 versus $348.2 million in the first quarter of fiscal 2014, with the decrease primarily driven by changes in inventory.

As of May 31, 2014, total inventory was $1.68 billion, representing an increase of $40.4 million, or 2.5%, compared with the balance at the start of fiscal 2015. The increase was due to new stores opened during the quarter as well as an increase in vehicle acquisition costs. Compared with May 31, 2013, inventory increased $283.6 million, or 20.3%, reflecting inventory added to support the 14 new stores opened since that date, sales growth at existing stores and an increase in vehicle acquisition costs. In the first quarter of the prior year, inventory declined $119.6 million, or 7.9%, compared with the start of fiscal 2014 reflecting a return to more normal inventory levels after having built inventory in the latter portion of fiscal 2013 to better position the company for seasonal sales opportunities.

Investing Activities. During the first quarter of the fiscal year, net cash used in investing activities totaled $94.1 million in fiscal 2015 compared with $46.5 million in fiscal 2014. Capital expenditures increased to $53.7 million in fiscal 2015 versus $42.0 million in the prior year period, largely reflecting changes in the timing of store construction and opening dates. Capital expenditures primarily include real estate acquisitions for planned future superstore openings and store construction costs. We maintain a multi-year pipeline of sites to support our superstore growth, so portions of capital spending in any one year may

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relate to superstores that we plan to open in subsequent fiscal years. After ramping superstore growth in recent years, our superstore opening pace has become more consistent, with 13 superstores opened in fiscal 2014, 13 superstores planned for fiscal 2015, and 10 to 15 superstores planned for each of the following 2 fiscal years.

Historically, capital expenditures have been funded with internally generated funds, debt and sale-leaseback transactions. No sale-leasebacks have been completed since fiscal 2009.

As of May 31, 2014, we owned 78 and leased 57 of our 135 used car superstores.

During the first quarter of the fiscal year, restricted cash from collections on auto loan receivables increased $31.4 million in fiscal 2015 versus a $16.4 million increase in fiscal 2014. These collections vary depending on the timing of the receipt of principal and interest payments on securitized auto loan receivables, the change in average managed receivables and the funding vehicle utilized.

Financing Activities. During the first quarter of the fiscal year, net cash provided by financing activities totaled $207.5 million in fiscal 2015 compared with $400.0 million in fiscal 2014. Included in these amounts were net increases in total non-recourse notes payable of $378.5 million and $512.3 million, respectively, which were used to provide the financing for the majority of the increases of $415.7 million and $425.8 million, respectively, in auto loan receivables. During the first three months of the fiscal year, cash provided by financing activities was reduced by $171.9 million of stock repurchases in fiscal 2015, versus $130.2 million in fiscal 2014.

Total Debt and Cash and Cash Equivalents

As of May 31 As of February 28 (In thousands) 2014 2014 Borrowings under revolving credit facility $ 1,242 $ 582 Finance and capital lease obligations 335,477 334,384 Non-recourse notes payable 7,626,975 7,248,444 Total debt $ 7,963,694$ 7,583,410 Cash and cash equivalents $ 532,191 $ 627,901



We have a $700 million unsecured revolving credit facility, which expires in August 2016. Borrowings under this credit facility are available for working capital and general corporate purposes, and the unused portion is fully available to us. See Note 10 for additional information on the revolving credit facility agreement.

The credit facility agreement contains representations and warranties, conditions and covenants. If these requirements were not met, all amounts outstanding or otherwise owed could become due and payable immediately and other limitations could be placed on our ability to use any available borrowing capacity.

CAF auto loan receivables are primarily funded through securitization transactions. Our securitizations are structured to legally isolate the auto loan receivables, and we would not expect to be able to access the assets of our securitization vehicles, even in insolvency, receivership or conservatorship proceedings. Similarly, the investors in the non-recourse notes payable have no recourse to our assets beyond the securitized receivables, the amounts on deposit in reserve accounts and the restricted cash from collections on auto loan receivables. We do, however, continue to have the rights associated with the interest we retain in these securitizations vehicles.

The timing of principal payments on the non-recourse notes payable is based on principal collections, net of losses, on the securitized auto loan receivables. The current portion of the non-recourse notes payable represents principal payments that are due to be distributed in the following period.

As of May 31, 2014, $6.66 billion of non-recourse notes payable was outstanding related to term securitizations. These notes payable accrue interest at fixed rates and have scheduled maturities through November 2020, but may mature earlier or later, depending on the repayment rate of the underlying auto loan receivables. During the first three months of fiscal 2015, we completed one term securitization, funding a total of $987 million of auto loan receivables.

As of May 31, 2014, $964.0 million of non-recourse notes payable was outstanding related to our warehouse facilities. The combined warehouse facility limit was $1.8 billion, and unused warehouse capacity totaled $836.0 million. In July 2014, we increased the limit of one of our warehouse facilities by an additional $300.0 million. Of the combined warehouse facility

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limit, $800.0 million will expire in August 2014 and $1.3 billion will expire in February 2015. The return requirements of the warehouse facility investors could fluctuate significantly depending on market conditions. At renewal, the cost, structure and capacity of the facilities could change. These changes could have a significant impact on our funding costs. See Notes 2 and 10 for additional information on the warehouse facilities.

The securitization agreements related to the warehouse facilities include various representations and warranties, covenants and performance triggers. If these requirements are not met, we could be unable to continue to securitize receivables through the warehouse facilities. In addition, the warehouse facility investors could charge us a higher rate of interest and could have us replaced as servicer. Further, we could be required to deposit collections on the securitized receivables with the warehouse facility agents on a daily basis and deliver executed lockbox agreements to the warehouse facility agents.

We expect that cash generated by operations and proceeds from securitization transactions or other funding arrangements, sale-leaseback transactions and borrowings under existing, new or expanded credit facilities will be sufficient to fund CAF, capital expenditures and working capital for the foreseeable future. We anticipate that we will be able to enter into new, or renew or expand existing, funding arrangements to meet our future funding needs. However, based on conditions in the credit markets, the cost for these arrangements could be materially higher than historical levels and the timing and capacity of these transactions could be dictated by market availability rather than our requirements.

In fiscal 2013, our board of directors authorized the repurchase of up to $800 million of our common stock, and in March 2014, our board of directors authorized the repurchase of up to an additional $1.0 billion of our common stock.

For the three months ended May 31, 2014, we repurchased 3,841,939 shares of common stock at an average purchase price of $45.33 per share. For the three months ended May 31, 2013, we repurchased 2,945,622 shares of common stock at an average purchase price of $42.29 per share. As of May 31, 2014, $1.1 billion was available for repurchase under the authorizations, of which $107.9 million is scheduled to expire on December 31, 2014, and $1.0 billion is scheduled to expire on December 31, 2015. Amounts reported as the repurchase and retirement of common stock on our statement of cash flows may reflect timing differences in trade and settlement dates on stock repurchase transactions occurring at the end of a reporting period.

Fair Value Measurements. We report money market securities, mutual fund investments and derivative instruments at fair value. See Note 6 for more information on fair value measurements.

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FORWARD-LOOKING STATEMENTS



We caution readers that the statements contained in this report about our future business plans, operations, opportunities, or prospects, including without limitation any statements or factors regarding expected sales, margins, expenditures, CAF income, or earnings, are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based upon management's current knowledge and assumptions about future events and involve risks and uncertainties that could cause actual results to differ materially from anticipated results. We disclaim any intent or obligation to update these statements. Among the factors that could cause actual results and outcomes to differ materially from those contained in the forward-looking statements are the following:

§ Changes in the competitive landscape and/or our failure to successfully adjust

to such changes.

§ Changes in general or regional U.S. economic conditions.

§ Changes in the availability or cost of capital and working capital financing,

including changes related to the asset-backed securitization market.

§ Changes in the attractiveness or availability of consumer credit provided by

our third-party financing providers.

§ Events that damage our reputation or harm the perception of the quality of our

brand.

§ Our inability to recruit, develop and retain associates and maintain positive

associate relations.

§ The loss of key associates from our store, regional or corporate management

teams or a significant increase in labor costs.

§ Security breaches or other events that result in the misappropriation, loss or

other unauthorized disclosure of confidential customer or associate

information.

§ Significant changes in prices of new and used vehicles.

§ A reduction in the availability of or access to sources of inventory or a

failure to expeditiously liquidate inventory.

§ Factors related to the regulatory and legislative environment in which we

operate.

§ Factors related to geographic growth, including the inability to acquire or

lease suitable real estate at favorable terms or to effectively manage our

growth.

§ The failure of key information systems.

§ The effect of various litigation matters.

§ Adverse conditions affecting one or more automotive manufacturers, and

manufacturer recalls.

§ The inaccuracy of estimates and assumptions used in the preparation of our

financial statements, or the effect of new accounting requirements or changes

to U.S. generally accepted accounting principles.

§ Factors related to the seasonal fluctuations in our business.

§ The occurrence of severe weather events.

§ Factors related to the geographic concentration of our superstores.

For more details on factors that could affect expectations, see Part II, Item 1A, "Risk Factors" on Page 37 of this report, our Annual Report on Form 10-K for the fiscal year ended February 28, 2014, and our quarterly or current reports as filed with or furnished to the U.S. Securities and Exchange Commission ("SEC"). Our filings are publicly available on our investor information home page at investor.carmax.com. Requests for information may also be made to our Investor Relations Department by email to investor_relations@carmax.com or by calling 1-804-747-0422, ext. 4391. We undertake no obligation to update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise.

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