CarMax 2000 Annual Report Download - page 44

CIRCUIT CITY STORES, INC. 2000 ANNUAL REPORT
42
Future minimum fixed lease obligations,excluding taxes,insurance and
other costs payable directly by the Company,as of February 29,2000,were:
Operating Operating
(Amounts in thousands) Capital Lease Sublease
Fiscal Leases Commitments Income
2001.................................................. $ 1,681 $ 313,535 $(13,042)
2002.................................................. 1,725 309,516 (11,791)
2003.................................................. 1,726 305,503 (10,801)
2004.................................................. 1,768 303,380 (9,238)
2005.................................................. 1,798 301,155 (8,664)
After 2005......................................... 14,666 3,303,866 (44,935)
Total minimum lease payments....... $23,364 $4,836,955 $(98,471)
Less amounts representing interest... 10,948
Present value of net minimum capital
lease payments [NOTE 5] .............. $12,416
In fiscal 2000,the Company entered into sale-leaseback transactions with
unrelated parties at an aggregate selling price of $36,795,000 ($235,500,000
in fiscal 1999 and $218,768,000 in fiscal 1998). The Company does not
have continuing involvement under the sale-leaseback transactions.
11. SUPPLEMENTARY FINANCIAL STATEMENT
INFORMATION
Advertising expense from continuing operations,which is included in
selling,general and administrative expenses in the accompanying consol-
idated statements of earnings, amounted to $438,781,000 (3.5 percent of
net sales and operating revenues) in fiscal 2000,$426,359,000 (3.9 per-
cent of net sales and operating revenues) in fiscal 1999 and $399,619,000
(4.5 percent of net sales and operating revenues) in fiscal 1998.
12. SECURITIZATIONS
(A) CREDIT CARD SECURITIZATIONS: The Company enters into securitization
transactions,which allow for the sale of credit card receivables to unre-
lated entities,to finance the consumer revolving credit receivables gener-
ated by its wholly owned finance operation. The reduction in the
aggregate securitized amount was $63.8 million for fiscal 2000,and pro-
ceeds from securitization transactions were $224.6 million for fiscal 1999
and $331.4 million for fiscal 1998.
Receivables relating to the securitization facilities consist of the following
at February 29 or 28:
(Amounts in thousands) 2000 1999
Managed receivables ....................................... $2,844,377 $2,957,132
Receivables/residual interests held
by the Company:
For sale....................................................... (18,288) (39,948)
For investment........................................... (144,806) (161,996)
Net receivables sold ......................................... $2,681,283 $2,755,188
Net receivables sold with recourse .................. $ 229,000 $ 322,000
Program capacity ............................................ $3,598,350 $3,127,000
Private-label credit card receivables are financed through securitization
programs employing a master trust structure. As of February 29, 2000,
these securitization programs had a capacity of $1.85 billion. The agree-
ment has no recourse provisions.
During fiscal 1998, a bank card master trust securitization facility was
established and issued two series from the trust. Provisions under the
master trust agreement provide recourse to the Company for any cash
flow deficiencies on $229 million of the receivables sold. The finance
charges from the transferred receivables are used to fund interest costs,
charge-offs,servicing fees and other related costs. The Company believes
that as of February 29, 2000, no liability existed under these recourse pro-
visions. The bank card securitization program has a total program capac-
ity of $1.75 billion.
Rights recorded for future finance income from serviced assets that exceed
the contractually specified servicing fees are carried at fair value and
amounted to $37.3 million at February 29,2000,$27.3 million at February 28,
1999,and $25.0 million at February 28, 1998, and are included in net
accounts receivable. Changes in these retained interests consisted of
originated retained interests of $52.9 million for fiscal 2000,$37.3 million
for fiscal 1999 and $33.3 million for fiscal 1998,less amortization of
$42.9 million in fiscal 2000,$35.0 million in fiscal 1999 and $11.5 million
in fiscal 1998. The servicing fees specified in the credit card securitization
agreements adequately compensate the finance operation for servicing the
accounts. Accordingly, no servicing asset or liability has been recorded.
The finance operation’s servicing revenue totaled $213.1 million for fiscal
2000,$210.4 million for fiscal 1999 and $195.7 million for fiscal 1998.
In determining the fair value of retained interests,the Company estimates
future cash flows from finance charge collections reduced by net defaults,
servicing cost and interest cost. The Company employs a risk-based pric-
ing strategy that increases the stated annual percentage rate for accounts
that have a higher predicted risk of default. Accounts with a lower risk
profile also may qualify for promotional financing.
The APRs of the private-label card programs,excluding promotional bal-
ances,range from 22 percent to 24 percent,with default rates varying
based on portfolio composition,but generally aggregating from 4 percent
to 6 percent. Principal payment rates vary widely both seasonally and by
credit terms but are in the range of 11 percent to 13 percent.
The bank card APRs are based on the prime rate and generally range
from 10 percent to 23 percent,with default rates varying by portfolio
composition,but generally aggregating from 8 percent to 12 percent.
Principal payment rates vary widely both seasonally and by credit terms
but are in the range of 7 percent to 9 percent.
Interest cost paid by the master trusts varies between series and,at
February 29, 2000, ranged from 6.2 percent to 6.7 percent.
(B) AUTOMOBILE LOAN SECURITIZATION: In fiscal 1996,the Company entered
into a securitization agreement to finance the consumer installment
credit receivables generated by its wholly owned automobile loan finance
operation. A restructuring of the facility during fiscal 1997 resulted in the
recourse provisions being eliminated. Proceeds from the automobile loan
securitization transaction were $348 million during fiscal 2000,$271 million