CarMax 2000 Annual Report Download - page 69

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CIRCUIT CITY STORES, INC. 2000 ANNUAL REPORT 67
CARMAX GROUP
Management believes that the proceeds from sales of property and equip-
ment and receivables,future increases in the Company’s debt allocated to
the CarMax Group,inter-group loans and cash generated by operations
will be sufficient to fund the CarMax Group’s capital expenditures and
operations.
MARKET RISK
The Company manages the automobile installment loan portfolio of the
Group’s finance operation. A portion of this portfolio is securitized and,
therefore,is not presented on the Group’s balance sheets. Interest rate
exposure relating to these receivables represents a market risk exposure
that the Company has managed with matched funding and interest rate
swaps. Total principal outstanding for fixed-rate automobile loans at
February 29, 2000, and February 28,1999,was as follows:
(Amounts in millions) 2000 1999
Fixed APR..................................................................... $932 $592
Financing for these receivables is achieved through asset securitization
programs that,in turn, issue both fixed- and floating-rate securities.
Interest rate exposure is hedged through the use of interest rate swaps
matched to projected payoffs. Receivables held by the Company for
investment or sale are financed with working capital. Financings at
February 29, 2000, and February 28,1999,were as follows:
(Amounts in millions) 2000 1999
Fixed-rate securitizations ............................................ $559 $ –
Floating-rate securitizations
synthetically altered to fixed .................................. 327 500
Floating-rate securitizations........................................ 1 39
Held by the Company:
For investment* ..................................................... 22 38
For sale................................................................... 23 15
Total ............................................................................. $932 $592
* Held by a bankruptcy remote special purpose company
The Company has analyzed its interest rate exposure and has concluded
that it did not represent a material market risk at February 29, 2000, or
February 28, 1999. Because it has a program in place to manage interest
rate exposure relating to its installment loan portfolio, the Company
expects to experience relatively little impact if interest rates fluctuate.
YEAR 2000 CONVERSION
Refer to the “Management’s Discussion and Analysis of Results of Opera-
tions and Financial Condition”for Circuit City Stores, Inc.for a complete
discussion of the Year 2000 issue and its impact on the Group’s financial
statements.
FORWARD-LOOKING STATEMENTS
Company statements that are not historical facts, including statements
about management’s expectations for fiscal year 2001 and beyond,are
forward-looking statements and involve various risks and uncertainties.
Refer to the “Circuit City Stores, Inc.Management’s Discussion and Analy-
sis of Results of Operations and Financial Condition”for a review of pos-
sible risks and uncertainties.