CarMax 1999 Annual Report Download - page 77

a higher predicted risk of default. Accounts with a lower risk pro-
file also may qualify for promotional financing.
The APRs range from 6 percent to 12 percent fixed, with
default rates varying based on credit quality, but generally aggre-
gating 0.75 percent to 1.25 percent. Weighted average life of the
receivables is expected to be in the 18 month to 20 month range.
Interest cost depends on the time at which accounts were
originated, but is in the range of 5 percent to 7 percent.
6. PROPERTY AND EQUIPMENT
Property and equipment, at cost, at February 28 is summarized as
follows:
(Amounts in thousands) 1999 1998
Land and buildings (20 to 25 years) ............. $ 47,487 $ 34,790
Land held for development .......................... 28,781 11,601
Construction in progress.............................. 76,355 139,225
Furniture, fixtures and equipment
(3 to 8 years) ........................................... 51,504 31,454
Leasehold improvements (10 to 15 years).... 15,658 4,390
219,785 221,460
Less accumulated depreciation..................... 15,839 7,373
Property and equipment, net........................ $203,946 $214,087
Land held for development is land owned for future sites that
are scheduled to open more than one year beyond the fiscal year
reported.
7. DEBT
Long-term debt of the Company at February 28 is summarized as
follows:
(Amounts in thousands) 1999 1998
Term loans.................................................... $405,000 $405,000
Industrial Development Revenue
Bonds due through 2006 at various
prime-based rates of interest
ranging from 5.0% to 7.0% ..................... 6,564 7,665
Obligations under capital leases................... 12,728 12,928
Note payable................................................ 5,000 –
Total long-term debt .................................... 429,292 425,593
Less current installments .............................. 2,707 1,301
Long-term debt, excluding
current installments................................. $426,585 $424,292
Portion of long-term debt allocated
to the CarMax Group.............................. $140,970 $ 27,386
In July 1994, the Company entered into a seven-year,
$100,000,000, unsecured bank term loan. The loan was restruc-
tured in August 1996 as a $100,000,000, six-year unsecured bank
term loan. Principal is due in full at maturity with interest payable
periodically at LIBOR plus 0.40 percent. At February 28, 1999,
the interest rate on the term loan was 5.76 percent.
In May 1995, the Company entered into a five-year,
$175,000,000, unsecured bank term loan. Principal is due in full at
maturity with interest payable periodically at LIBOR plus 0.35
percent. At February 28, 1999, the interest rate on the term loan
was 5.67 percent.
In June 1996, the Company entered into a five-year,
$130,000,000, unsecured bank term loan. Principal is due in full at
maturity with interest payable periodically at LIBOR plus 0.35
percent. At February 28, 1999, the interest rate on the term loan
was 5.29 percent.
The Company maintains a multi-year, $150,000,000, unse-
cured revolving credit agreement with four banks. The agreement
calls for interest based on both committed rates and money mar-
ket rates and a commitment fee of 0.13 percent per annum. The
agreement was entered into as of August 31, 1996, and terminates
August 31, 2002. No amounts were outstanding under the revolv-
ing credit agreement at February 28, 1999 or 1998.
Under certain of the debt agreements, the Company must
meet financial covenants relating to minimum tangible net worth,
current ratios and debt-to-capital ratios. The Company was in
compliance with all such covenants at February 28, 1999 and 1998.
In November 1998, CarMax entered into a four-year, unse-
cured $5,000,000 promissory note. Principal is due annually with
interest payable periodically at 8.25 percent.
In fiscal 1999, CarMax entered into a $200,000,000 one-
year, renewable inventory financing arrangement with an asset-
backed commercial paper conduit. The arrangement will provide
funding for the acquisition of vehicle inventory through the use of
a non-affiliated special purpose company. During fiscal 1999, no
inventory was financed by CarMax under this arrangement.
Short-term debt of the Company is funded through committed
lines of credit and informal credit arrangements, as well as the
revolving credit agreement. Amounts outstanding and committed
lines of credit available are as follows:
Years Ended February 28
(Amounts in thousands) 1999 1998
Average short-term debt outstanding ........... $ 54,505 $ 48,254
Maximum short-term debt outstanding........ $463,000 $414,000
Aggregate committed lines of credit............. $370,000 $410,000
The weighted average interest rate on the outstanding short-
term debt was 5.1 percent during fiscal 1999, 5.7 percent during
fiscal 1998 and 5.4 percent during fiscal 1997.
Interest expense allocated by the Company to the CarMax
Group, excluding interest capitalized, was $6,393,000 in fiscal
1999, $1,789,000 in fiscal 1998 and $6,279,000 in fiscal 1997.
The CarMax Group capitalizes interest in connection with the
construction of certain facilities. In fiscal 1999, interest capitalized
amounted to $2,674,000 ($4,879,000 in fiscal 1998 and $898,000
in fiscal 1997).
CARMAX GROUP
CIRCUIT CITY STORES, INC. 1999 ANNUAL REPORT 75