CarMax 2000 Annual Report Download - page 60

CIRCUIT CITY STORES, INC. 2000 ANNUAL REPORT
58
Based on the Company’s historical and current pretax earnings,manage-
ment believes the amount of gross deferred tax assets will be realized
through future taxable income; therefore,no valuation allowance is necessary.
7. ASSOCIATE BENEFIT AND STOCK
INCENTIVE PLANS
(A) 401(K) PLAN: Effective August 1,1999,the Company sponsors a 401(k)
Plan for all employees meeting certain eligibility criteria. Under the Plan,
eligible employees can contribute up to 15 percent of their salaries, and
the Company matches a portion of those associate contributions. The
Company’s contributions to this plan for Circuit City Group associates
was $2,158,000 in fiscal 2000.
(B) PREFERRED STOCK: In conjunction with the Company’s Shareholders
Rights Plan as amended and restated,preferred stock purchase rights
were distributed as a dividend at the rate of one right for each share of
Circuit City Group Stock. The rights are exercisable only upon the attain-
ment of,or the commencement of a tender offer to attain,a specified
ownership interest in the Company by a person or group. When exercis-
able,each Circuit City Group right would entitle shareholders to buy one
eight-hundredth of a share of Cumulative Participating Preferred Stock,
Series E, $20 par value,at an exercise price of $125 per share subject to
adjustment. A total of 500,000 shares of such preferred stock,which have
preferential dividend and liquidation rights,have been designated. No
such shares are outstanding. In the event that an acquiring person or
group acquires the specified ownership percentage of the Company’s
common stock (except pursuant to a cash tender offer for all outstanding
shares determined to be fair by the board of directors) or engages in cer-
tain transactions with the Company after the rights become exercisable,
each right will be converted into a right to purchase, for half the current
market price at that time,shares of the related Group stock valued at two
times the exercise price.
The Company also has 1,000,000 shares of undesignated preferred stock
authorized of which no shares are outstanding and an additional 500,000
shares of preferred stock designated as Series F which are related to simi-
lar rights held by CarMax Group shareholders.
(C) VOTING RIGHTS: The holders of both series of common stock and any
series of preferred stock outstanding and entitled to vote together with
the holders of common stock will vote together as a single voting group
on all matters on which common shareholders generally are entitled to
vote other than a matter on which the common stock or either series
thereof or any series of preferred stock would be entitled to vote as a sep-
arate voting group. On all matters on which both series of common stock
would vote together as a single voting group,(i) each outstanding share of
Circuit City Group Stock shall have one vote and (ii) each outstanding
share of CarMax Group Stock shall have a number of votes based on the
weighted average ratio of the market value of a share of CarMax Group
Stock to a share of Circuit City Group Stock. If shares of only one series of
common stock are outstanding,each share of that series shall be entitled
to one vote. If either series of common stock is entitled to vote as a sepa-
rate voting group with respect to any matter,each share of that series
shall,for purposes of such vote,be entitled to one vote on such matter.
(D) RESTRICTED STOCK: The Company has issued restricted stock under the
provisions of the 1994 Stock Incentive Plan whereby management and
key employees are granted restricted shares of Circuit City Group Stock.
Shares are awarded in the name of the employee,who has all the rights of
a shareholder, subject to certain restrictions or forfeitures. Restrictions on
the awards generally expire three to seven years from the date of grant.
Total restricted stock awards of 345,644 shares of Circuit City Group Stock
were granted to eligible employees in fiscal 2000. The market value at the
date of grant of these shares has been recorded as unearned compensa-
tion and is a component of group equity. Unearned compensation is
expensed over the restriction periods. In fiscal 2000,a total of
$11,648,700 was charged to operations ($8,741,100 in fiscal 1999 and
$4,995,400 in fiscal 1998). As of February 29,2000,1,559,966 restricted
shares of Circuit City Group Stock were outstanding.
(E) EMPLOYEE STOCK PURCHASE PLAN: The Company has Employee Stock
Purchase Plans for all employees meeting certain eligibility criteria.
Under the Circuit City Group Plan,eligible employees may purchase
shares of Circuit City Group Stock,subject to certain limitations. For each
$1.00 contributed by employees under the Plan,the Company matches
$0.15. Purchases are limited to 10 percent of an employee’s eligible com-
pensation,up to a maximum of $7,500 per year. At February 29,2000,a
total of 864,046 shares remained available under the Circuit City Group
Plan. During fiscal 2000,501,984 shares were issued to or purchased on
the open market for employees (858,710 shares in fiscal 1999 and 901,396
in fiscal 1998). The average price per share purchased under the Plan was
$41.70 in fiscal 2000, $21.69 in fiscal 1999 and $18.39 in fiscal 1998. The
Company match or purchase price discount charged to Circuit City Group
operations totaled $2,682,300 in fiscal 2000,$2,716,400 in fiscal 1999 and
$2,509,500 in fiscal 1998.
(F) STOCK INCENTIVE PLANS: Under the Company’s stock incentive plans,
incentive and nonqualified stock options may be granted to management,
key employees and outside directors to purchase shares of Circuit City
Group Stock. The exercise price for incentive stock options for employees
and nonqualified options for outside directors is equal to,or greater than,
the market value at the date of grant; for nonqualified options granted
under the 1988 Plan for employees,it is at least 85 percent of the market
value at the date of grant (100 percent under the 1994 Plan). Options gen-
erally are exercisable over a period of from one to 10 years from the date
of grant.
A summary of the status of the Circuit City Group’s stock options and
changes during the years ended February 29,2000,and February 28, 1999
and 1998,are shown in Table 1. Table 2 summarizes information about
stock options outstanding as of February 29,2000.