Under the terms of our Articles of Incorporation, the board of directors (“board”) may determine the rights, preferences and terms of our authorized but unissued shares of preferred stock. We have authorized 20,000,000 shares of preferred stock, $20 par value. No shares of preferred stock are currently outstanding.

As of February 28, 2022, a total of $2 billion of board authorizations for repurchases of our common stock was outstanding, with no expiration date, of which $774.5 million remained available for repurchase. In April 2022, our board increased our share repurchase authorization by $2 billion.


	Years Ended February 28 or 29
	2022		2021		2020
Number of shares repurchased (in thousands)	4,475.2		2,379.8		6,971.1
Average cost per share	$	125.49	$	90.87	$	80.56
Available for repurchase, as of end of year (in millions)	$	774.5	$	1,336.1	$	1,552.3

We maintain long-term incentive plans for management, certain employees and the nonemployee members of our board. The plans allow for the granting of equity-based compensation awards, including nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock awards, stock- and cash-settled restricted stock units, stock grants or a combination of awards. To date, we have not awarded any incentive stock options.

As of February 28, 2022, a total of 60,850,000 shares of our common stock had been authorized to be issued under the long-term incentive plans. The number of unissued common shares reserved for future grants under the long-term incentive plans was 6,700,484 as of that date.

The majority of associates who receive share-based compensation awards primarily receive cash-settled restricted stock units. Senior management and other key associates receive awards of nonqualified stock options, stock-settled restricted stock units and/or restricted stock awards. Nonemployee directors receive awards of nonqualified stock options, stock grants, stock-settled restricted stock units and/or restricted stock awards. Excluding stock grants and stock-settled deferred stock units, all share-based compensation awards, including any associated dividend rights, are subject to forfeiture.

Nonqualified Stock Options. Nonqualified stock options are awards that allow the recipient to purchase shares of our common stock at a fixed price. Stock options are granted at an exercise price equal to the fair market value of our common stock on the grant date. The stock options generally vest annually in equal amounts over four years. These options expire seven years after the date of the grant.

Cash-Settled Restricted Stock Units. Also referred to as restricted stock units, or RSUs, these are awards that entitle the holder to a cash payment equal to the fair market value of a share of our common stock for each unit granted. For grants prior to fiscal 2021, conversion generally occurs at the end of a three-year vesting period. For RSUs granted during or after fiscal 2021, conversion generally occurs annually in equal amounts over three years. However, the cash payment per RSU will not be greater than 200% or less than 75% of the fair market value of a share of our common stock on the grant date. The initial grant date fair values are based on the volume-weighted average prices or closing prices of our common stock on the grant dates. RSUs are liability-classified awards and do not have voting rights.

Stock-Settled Market Stock Units. Also referred to as market stock units, or MSUs, these are restricted stock unit awards with market conditions granted to eligible key associates that are converted into between zero and two shares of common stock for each unit granted. Conversion generally occurs at the end of a three-year vesting period. The conversion ratio is calculated by dividing the average closing price of our stock during the final 40 trading days of the three-year vesting period by our stock price on the grant date, with the resulting quotient capped at two. This quotient is then multiplied by the number of MSUs granted to yield the number of shares awarded. The grant date fair values are determined using a Monte-Carlo simulation and are based on the expected market price of our common stock on the vesting date and the expected number of converted common shares. MSUs do not have voting rights.

Stock-Settled Performance Stock Units. Also referred to as performance stock units, or PSUs, these are restricted stock unit awards with performance conditions granted to eligible key associates that are converted into between zero and two shares of common stock for each unit granted. Conversion generally occurs at the end of a three-year vesting period.

For the fiscal 2020 grants, the conversion ratio is based on the company reaching certain performance target levels set by the board at the beginning of each one-year period, with the resulting quotients subject to meeting a minimum 25% threshold and capped at 200%. These quotients are then multiplied by the number of PSUs granted to yield the number of shares awarded. For the first-year period, these targets were based on annual pretax diluted earnings per share excluding any unrealized gains or losses on equity investments in private companies. The board certified a performance adjustment factor of 117% for the first-year period. In fiscal 2022, the board certified a performance adjustment factor of 100% for the second-year period based on successfully increasing market share, maintaining compliance with financial covenants and other factors during the COVID-19 crisis in fiscal 2021. In addition, the performance target for the third-year period was set based on annual pretax diluted earnings per share excluding any unrealized gains or losses on equity investments in private companies. No PSUs were awarded in fiscal 2021.

For the fiscal 2022 grants, the first-year period targets were based on annual pretax diluted earnings per share excluding any unrealized gains or losses on equity investments in private companies. For the second- and third-year periods, the remaining awarded 25,397 PSUs do not qualify as grants under ASC 718 as mutual understanding of the target performance levels are either not fully set or have not been set. PSUs do not have voting rights. The grant date fair values are based on the closing prices of our common stock on the grant dates. As of February 28, 2022, 75,845 units were outstanding at a weighted average grant date fair value per share of $118.72.

Stock-Settled Deferred Stock Units. Also referred to as deferred stock units, or DSUs, these are restricted stock unit awards granted to non-employee members of our board of directors that are converted into one share of common stock for each unit granted. Conversion occurs at the end of the one-year vesting period unless the director has exercised the option to defer conversion until separation of service to the company. The grant date fair values are based on the volume-weighted average prices or closing prices of our common stock on the grant dates. DSUs have no voting rights. As of February 28, 2022, 69,288 units were outstanding at a weighted average grant date fair value of $92.82.

Restricted Stock Awards. Restricted stock awards, or RSAs, are awards of our common stock that are subject to specified restrictions that generally lapse after a one- to three-year period from the date of the grant. The grant date fair values are based on the volume-weighted average prices or closing prices of our common stock on the grant dates. Participants holding restricted stock are entitled to vote on matters submitted to holders of our common stock for a vote. As of February 28, 2022, there were 24,171 shares outstanding at a weighted average grant date fair value of $119.96.

Employee Stock Purchase Plan. We sponsor an employee stock purchase plan for all associates meeting certain eligibility criteria. We have authorized up to 8,000,000 shares of common stock with a total of 2,265,843 shares remaining available for issuance under the plan as of February 28, 2022. Associate contributions are limited to 10% of eligible compensation, up to a maximum of $10,000 per year. For each $1.00 contributed to the plan by associates, we match $0.15. Shares are acquired through open-market purchases. We purchased 160,093 shares at an average price per share of $125.22 during fiscal 2022, 202,085 shares at an average price per share of $87.41 during fiscal 2021 and 174,325 shares at an average price per share of $85.64 during fiscal 2020.


	Years Ended February 28 or 29
(In thousands)	2022		2021		2020
Cost of sales	$	4,924	$	6,805	$	6,382
CarMax Auto Finance income	5,043		5,657		4,940
Selling, general and administrative expenses	101,966		111,749		99,435
Share-based compensation expense, before income taxes	$	111,933	$	124,211	$	110,757


	Years Ended February 28 or 29
(In thousands)	2022		2021		2020
Nonqualified stock options	$	33,598	$	31,500	$	30,166
Cash-settled restricted stock units (RSUs)	52,435		72,243		60,739
Stock-settled market stock units (MSUs)	13,984		15,596		12,874
Other share-based incentives:
Stock-settled performance stock units (PSUs)	6,289		489		2,559
Stock-settled deferred stock units (DSUs)	1,925		1,925		2,500
Restricted stock (RSAs)	966		147		23
Employee stock purchase plan	2,736		2,311		1,896
Total other share-based incentives	11,916		4,872		6,978
Share-based compensation expense, before income taxes	$	111,933	$	124,211	$	110,757


	As of February 28, 2022
			Weighted Average
	Unrecognized		Remaining
	Compensation		Recognition Life
(Costs in millions)	Costs		(Years)
Nonqualified stock options	$	47.3	1.8
Stock-settled market stock units	14.3		1.1
Other share-based incentives:
Stock-settled performance stock units	1.6		0.5

Restricted stock	1.8		1.3
Total other share-based incentives	3.4		0.9
Total	$	65.0	1.6

We recognize compensation expense for stock options, MSUs, PSUs, DSUs and RSAs on a straight-line basis (net of estimated forfeitures) over the requisite service period, which is generally the vesting period of the award. The PSU expense is adjusted for any change in management’s assessment of the performance target level that is probable of being achieved. The variable expense associated with RSUs is recognized over their vesting period (net of estimated forfeitures) and is calculated based on the volume-weighted average price or closing price of our common stock on the last trading day of each reporting period.

The total costs for matching contributions for our employee stock purchase plan are included in share-based compensation expense. There were no capitalized share-based compensation costs as of or for the years ended February 28, 2022, February 28, 2021 or February 29, 2020.


				Weighted
		Weighted		Average
		Average		Remaining	Aggregate
	Number of	Exercise		Contractual	Intrinsic
(Shares and intrinsic value in thousands)	Shares	Price		Life (Years)	Value
Outstanding as of February 28, 2021	6,266	$	67.57
Options granted	922	136.88
Options exercised	(1,302)	61.30
Options forfeited or expired	(90)	90.25
Outstanding as of February 28, 2022	5,796	$	79.66	4.2	$	196,694

Exercisable as of February 28, 2022	3,031	$	68.72	3.5	$	125,141


	Years Ended February 28 or 29
	2022		2021		2020
Options granted	922,475		1,607,401		1,601,489
Weighted average grant date fair value per share	$	42.31	$	22.80	$	22.10
Cash received from options exercised (in millions)	$	79.8	$	143.1	$	124.4
Intrinsic value of options exercised (in millions)	$	95.2	$	94.0	$	78.6
Realized tax benefits (in millions)	$	20.6	$	25.5	$	21.8

For stock options, the fair value of each award is estimated as of the date of grant using a binomial valuation model. In computing the value of the option, the binomial model considers characteristics of fair-value option pricing that are not available for consideration under a closed-form valuation model (for example, the Black-Scholes model), such as the contractual term of the option, the probability that the option will be exercised prior to the end of its contractual life and the probability of termination or retirement of the option holder. For this reason, we believe that the binomial model provides a fair value that is more representative of actual experience and future expected experience than the value calculated using a closed-form model. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by the recipients of share-based awards.


	Years Ended February 28 or 29
	2022					2021					2020
Dividend yield				0.0	%				0.0	%				0.0	%
Expected volatility factor (1)	31.8	%	-	37.6	%	36.1	%	-	56.1	%	26.8	%	-	32.6	%
Weighted average expected volatility				36.2	%				38.2	%				29.2	%
Risk-free interest rate (2)	0.0	%	-	1.4	%	0.1	%	-	0.7	%	1.5	%	-	2.4	%
Expected term (in years) (3)				4.6					4.6					4.6


		Weighted
		Average
	Number of	Grant Date
(Units in thousands)	Units	Fair Value
Outstanding as of February 28, 2021	1,606	$	70.88
Stock units granted	378	136.46
Stock units vested and converted	(722)	66.28
Stock units cancelled	(99)	90.76
Outstanding as of February 28, 2022	1,163	$	93.37


	Years Ended February 28 or 29
	2022		2021		2020
Stock units granted	378,382		669,937		562,321
Initial weighted average grant date fair value per share	$	136.46	$	71.09	$	78.62
Payments (before payroll tax withholdings) upon
vesting (in millions)	$	92.6	$	38.1	$	37.8
Realized tax benefits (in millions)	$	23.0	$	10.5	$	10.5


		Weighted
		Average
	Number of	Grant Date
(Units in thousands)	Units	Fair Value
Outstanding as of February 28, 2021	520	$	90.53
Stock units granted	82	178.15
Stock units vested and converted	(198)	82.16
Stock units cancelled	(11)	122.75
Outstanding as of February 28, 2022	393	$	112.17