CARMAX INCKMX
CARMAX INC Goodwill & Intangibles Disclosure
GOODWILL AND INTANGIBLE ASSETS
Goodwill
We test goodwill for impairment annually as of December 1, or whenever events and circumstances indicate that the carrying value of a reporting unit may be higher than its fair value. Goodwill is tested for impairment at the reporting unit level, which are determined in accordance with the provisions of ASC 350, Intangibles – Goodwill and Other. Subsequent to the operating segment change made during the first quarter of fiscal 2025, the goodwill acquired as part of the Edmunds acquisition of $141.3 million was allocated solely to our CarMax Sales Operations reporting unit.
The quantitative goodwill impairment test requires determination of whether the fair value of a reporting unit is less than its carrying value. The fair value of our reporting units is estimated using a combination of an income approach, which uses discounted cash flow (“DCF”) analysis, and a market approach, which relies on valuation multiples derived from operating values and financial and/or operating measures for publicly traded comparable companies. The fair value is intended to represent our estimate of the price a potential market participant would be willing to pay for the reporting unit in an arms-length transaction. If the carrying value of a reporting unit exceeds its estimated fair value, an impairment charge is recognized.
The DCF analysis requires the use of estimates and assumptions including, but not limited to, revenue growth rates, margin rates, capital expenditures, and weighted-average costs of capital. In connection with the quantitative goodwill impairment test, we also reconcile the estimated aggregate fair values of our reporting units to our market capitalization, including consideration of a reasonable control premium that represents the estimated amount a market participant would pay to obtain a controlling interest in our equity securities. Our cash flow projections are based on our recent financial performance, expectations of future performance, knowledge of the automotive industry, and other assumptions we believe to be reasonable but that are inherently uncertain. Actual future results may differ from those estimates.
As a result of our annual impairment test, we recorded a non-cash goodwill impairment charge of $141.3 million during the fourth quarter of fiscal 2026, all of which related to our CarMax Sales Operations reporting unit. This non-cash charge is reflected as goodwill impairment in the accompanying consolidated statements of earnings. The impairment was driven by a combination of a significant decline in market capitalization resulting from the decrease in our share price, pressured financial performance during fiscal 2026 and downward revisions to our forecasted financial outlook relative to the prior year’s outlook. The decline in market capitalization accelerated late in the third quarter of fiscal 2026 and carried forward into the fourth quarter, creating significant pressure on the results of our market capitalization reconciliation procedures described above.
Intangibles
| As of February 28, 2026 | |||||||||||
| Gross Carrying | Accumulated | Net | |||||||||
| (In thousands) | Amount | Amortization | Amount | ||||||||
| Intangible assets not subject to amortization: | |||||||||||
| Trade name | $ | 31,900 | $ | — | $ | 31,900 | |||||
| Intangible assets subject to amortization: | |||||||||||
| Internally developed software | 52,900 | (35,896) | 17,004 | ||||||||
| Customer relationships | 133,200 | (37,218) | 95,982 | ||||||||
| Total intangible assets | $ | 218,000 | $ | (73,114) | $ | 144,886 | |||||
| As of February 28, 2025 | |||||||||||
| Gross Carrying | Accumulated | Net | |||||||||
| Amount | Amortization | Amount | |||||||||
| Intangible assets not subject to amortization: | |||||||||||
| Trade name | $ | 31,900 | $ | — | $ | 31,900 | |||||
| Intangible assets subject to amortization: | |||||||||||
| Internally developed software | 52,900 | (28,339) | 24,561 | ||||||||
| Customer relationships | 133,200 | (29,382) | 103,818 | ||||||||
| Total intangible assets | $ | 218,000 | $ | (57,721) | $ | 160,279 | |||||
The intangible assets above relate to Edmunds.
Amortization expense of intangible assets was $15.4 million in fiscal 2026, fiscal 2025 and fiscal 2024.
We estimate that amortization expense related to intangible assets will be $15.4 million in each of the next two fiscal years, $9.7 million in fiscal 2029 and $7.8 million in fiscal 2030 and fiscal 2031.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | Apr 15, 2026 | Showing above |
| 2025 | Apr 11, 2025 | |
| 2024 | Apr 15, 2024 | |
| 2023 | Apr 13, 2023 | |
About Goodwill & Intangibles Disclosures
Goodwill and intangible asset disclosures reveal the premium paid in acquisitions and how management assesses whether that premium retains its value. Since goodwill is no longer amortized under US GAAP, the annual impairment test is the only mechanism that adjusts carrying values downward — making the assumptions behind that test critically important for investors.
Key signals: a history of goodwill impairments suggests management consistently overpays for acquisitions. Watch the gap between reporting unit fair value and carrying amount — when fair value exceeds carrying amount by less than 10-20%, a small decline in business performance could trigger a write-down. For finite-lived intangibles, examine useful life assumptions across customer relationships, technology, and trade names; aggressive estimates inflate near-term earnings. Compare total intangibles-to-total-assets ratios against peers to assess acquisition dependency. Rising goodwill as a percentage of equity can signal balance sheet fragility.