CarMax 2000 Annual Report Download - page 43

CIRCUIT CITY STORES, INC. 2000 ANNUAL REPORT 41
CIRCUIT CITY STORES, INC.
included in the calculation at the end of fiscal 2000. Prior to fiscal 2000,
dilutive potential common shares of CarMax Group Stock were not
included in the calculation of diluted net loss per share because the Group
had a net loss for those periods.
9. PENSION PLAN
The Company has a noncontributory defined benefit pension plan cover-
ing the majority of full-time employees who are at least age 21 and have
completed one year of service. The cost of the program is being funded
currently. Plan benefits generally are based on years of service and aver-
age compensation. Plan assets consist primarily of equity securities and
included 160,000 shares of Circuit City Group Stock at February 29, 2000,
and February 28, 1999. Contributions required were $12,123,000 in fiscal
2000,$10,306,000 in fiscal 1999 and $11,642,000 in fiscal 1998. The fol-
lowing tables set forth the Plan’s financial status and amounts recognized
in the consolidated balance sheets as of February 29 or 28:
(Amounts in thousands) 2000 1999
Change in benefit obligation:
Benefit obligation at beginning of year................. $112,566 $89,124
Service cost............................................................ 14,678 11,004
Interest cost........................................................... 7,557 6,202
Actuarial (gain) loss.............................................. (16,870) 9,526
Benefits paid.......................................................... (4,151) (3,290)
Benefit obligation at end of year............................ $113,780 $112,566
Change in plan assets:
Fair value of plan assets at beginning of year ....... $ 95,678 $ 84,251
Actual return on plan assets.................................. 13,827 4,411
Employer contributions......................................... 12,123 10,306
Benefits paid.......................................................... (4,151) (3,290)
Fair value of plan assets at end of year.................. $117,477 $ 95,678
Reconciliation of funded status:
Funded status........................................................ $ 3,697 $(16,888)
Unrecognized actuarial (gain) loss ....................... (11,986) 9,720
Unrecognized transition asset............................... (404) (606)
Unrecognized prior service benefit....................... (427) (560)
Net amount recognized ......................................... $ (9,120) $ (8,334)
The components of net pension expense are as follows:
Years Ended February 29 or 28
(Amounts in thousands) 2000 1999 1998
Service cost ............................................. $14,678 $11,004 $ 8,584
Interest cost............................................. 7,557 6,202 5,260
Expected return on plan assets............... (9,078) (7,794) (5,133)
Amortization of prior service cost.......... (202) (105) (105)
Amortization of transitional asset.......... (134) (202) (202)
Recognized actuarial loss........................ 87 – 17
Net pension expense ............................... $12,908 $ 9,105 $ 8,421
Assumptions used in the accounting for the pension plan were:
Years Ended February 29 or 28
2000 1999 1998
Weighted average discount rate.................. 8.0% 6.8% 7.0%
Rate of increase in compensation levels..... 6.0% 5.0% 5.0%
Expected rate of return on plan assets....... 9.0% 9.0% 9.0%
10. LEASE COMMITMENTS
The Company conducts a substantial portion of its business in leased
premises. The Company’s lease obligations are based upon contractual
minimum rates. For certain locations,amounts in excess of these mini-
mum rates are payable based upon specified percentages of sales. Rental
expense and sublease income for all operating leases are summarized
as follows:
Years Ended February 29 or 28
(Amounts in thousands) 2000 1999 1998
Minimum rentals.............................. $322,598 $296,706 $248,383
Rentals based on sales volume.......... 1,327 1,247 730
Sublease income................................ (16,425) (14,857) (12,879)
Net..................................................... $307,500 $283,096 $236,234
The Company computes rent based on a percentage of sales volumes in
excess of defined amounts in certain store locations. Most of the Com-
pany’s other leases are fixed-dollar rental commitments, with many con-
taining rent escalations based on the Consumer Price Index. Most provide
that the Company pay taxes,maintenance,insurance and certain other
operating expenses applicable to the premises.
The initial term of most real property leases will expire within the next 22
years; however, most of the leases have options providing for additional
lease terms of five years to 25 years at terms similar to the initial terms.