CarMax 2000 Annual Report Download - page 39

CIRCUIT CITY STORES, INC. 2000 ANNUAL REPORT 37
CIRCUIT CITY STORES, INC.
2000. Although the Company has the ability to refinance this loan,it
intends to repay the debt using existing working capital.
In June 1996,the Company entered into a five-year,$130,000,000,unse-
cured bank term loan. Principal is due in full at maturity with interest
payable periodically at LIBOR plus 0.35 percent. At February 29, 2000, the
interest rate on the term loan was 6.23 percent.
The Company maintains a multi-year,$150,000,000,unsecured revolving
credit agreement with four banks. The agreement calls for interest based on
both committed rates and money market rates and a commitment fee of
0.18 percent per annum. The agreement was entered into as of August 31,
1996,and terminates August 31,2002. No amounts were outstanding under
the revolving credit agreement at February 29,2000,or February 28, 1999.
The Industrial Development Revenue Bonds are collateralized by land,
buildings and equipment with an aggregate carrying value of approximately
$8,404,000 at February 29,2000,and $10,740,000 at February 28,1999.
In November 1998,the CarMax Group entered into a four-year,unsecured
$5,000,000 promissory note. Principal is due annually with interest
payable periodically at 8.25 percent.
In fiscal 1999,the CarMax Group entered into a one-year,renewable
inventory financing arrangement with an asset-backed commercial paper
conduit. The arrangement had a total program capacity of $160 million at
February 29, 2000, and was created to provide funding for the acquisition
of vehicle inventory through the use of a non-affiliated special-purpose
company. During fiscal years 2000 and 1999,no inventory was financed
by the CarMax Group under this arrangement. This financing arrange-
ment was terminated in the first quarter of fiscal 2001.
The scheduled aggregate annual principal payments on long-term obliga-
tions for the next five fiscal years are as follows: 2001 - $177,344,000;
2002 - $132,485,000; 2003 - $102,594,000; 2004 - $1,507,000;
2005 - $2,521,000.
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 29,2000,and February 28, 1999.
Short-term debt is funded through committed lines of credit and infor-
mal credit arrangements,as well as the revolving agreement. Amounts
outstanding and committed lines of credit available are as follows:
Years Ended February 29 or 28
(Amounts in thousands) 2000 1999
Average short-term debt outstanding....... $ 44,692 $ 54,505
Maximum short-term debt outstanding.... $411,791 $463,000
Aggregate committed lines of credit ........ $370,000 $370,000
The weighted average interest rate on the outstanding short-term debt
was 5.6 percent during fiscal 2000, 5.1 percent during fiscal 1999 and
5.7 percent during fiscal 1998.
The Company capitalizes interest in connection with the construction of
certain facilities and software developed or obtained for internal use. In
fiscal 2000, interest capitalized amounted to $3,420,000 ($5,423,000 in
fiscal 1999 and $9,638,000 in fiscal 1998).
6. INCOME TAXES
The Company files a consolidated federal income tax return. The compo-
nents of the provision for income taxes from continuing operations are
as follows:
Years Ended February 29 or 28
(Amounts in thousands) 2000 1999 1998
Current:
Federal .................................. $ 140,119 $ 99,228 $58,453
State ...................................... 17,756 13,148 3,076
157,875 112,376 61,529
Deferred:
Federal .................................. 41,762 16,718 12,801
State ...................................... 1,291 517 2,251
43,053 17,235 15,052
Provision for income taxes ......... $200,928 $129,611 $76,581
The effective income tax rate differed from the Federal statutory income
tax rate as follows:
Years Ended February 29 or 28
2000 1999 1998
Federal statutory income tax rate......... 35.0% 35.0% 35.0%
State and local income taxes,
net of Federal benefit...................... 3.0 3.0 3.0
Effective income tax rate ...................... 38.0% 38.0% 38.0%
In accordance with SFAS No.109,the tax effects of temporary differences
that give rise to a significant portion of the deferred tax assets and liabili-
ties at February 29 or 28 are as follows:
(Amounts in thousands) 2000 1999
Deferred tax assets:
Deferred revenue........................................... $ 1,146 $ 8,332
Inventory capitalization................................ 2,609 2,578
Accrued expenses.......................................... 33,484 27,080
Other.............................................................. 6,330 5,430
Total gross deferred tax assets................. 43,569 43,420
Deferred tax liabilities:
Depreciation and amortization..................... 51,035 48,035
Deferred revenue........................................... 29,656 6,903
Gain on sales of receivables........................... 18,988 14,990
Other prepaid expenses................................. 26,111 20,210
Other.............................................................. 6,651 707
Total gross deferred tax liabilities............ 132,441 90,845
Net deferred tax liability...................................... $ 88,872 $47,425