CarMax 2001 Annual Report Download - page 63

Because of the Inter-Group Interest, the Circuit City Group
also is subject to risks and uncertainties related to the CarMax
Group. The CarMax Group is a used- and new-car retail busi-
ness. The diversity of the CarMax Group’s customers and suppli-
ers reduces the risk that a severe impact will occur in the near
term as a result of changes in its customer base, competition or
sources of supply. However, because of the CarMax Group’s lim-
ited overall size, management cannot assure that unanticipated
events will not have a negative impact on the Circuit City Group.
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assump-
tions that affect the reported amounts of assets, liabilities, rev-
enues and expenses and the disclosure of contingent assets and
liabilities. Actual results could differ from those estimates.
(P) RECLASSIFICATIONS: Certain amounts in prior years have been
reclassified to conform to classifications adopted in fiscal 2001.
3. PROPERTY AND EQUIPMENT
Property and equipment, at cost, at February 28 or 29 is summa-
rized as follows:
(Amounts in thousands) 2001 2000
Land and buildings (20 to 25 years)............ $ 76,660 $ 98,537
Land held for sale........................................... 2,759 —
Construction in progress ............................... 44,335 51,378
Furniture, fixtures and equipment
(3 to 8 years).............................................. 809,501 690,512
Leasehold improvements
(10 to 15 years)........................................... 598,586 566,103
Capital leases, primarily buildings
(20 years).................................................... 12,471 12,471
1,544,312 1,419,001
Less accumulated depreciation and
amortization............................................... 747,523 665,676
Property and equipment, net........................ $ 796,789 $ 753,325
4. DEBT
Long-term debt of the Company at February 28 or 29 is summa-
rized as follows:
(Amounts in thousands) 2001 2000
Term loans .......................................................... $230,000 $405,000
Industrial Development Revenue Bonds due
through 2006 at various prime-based rates
of interest ranging from 5.5% to 6.7%...... 4,400 5,419
Obligations under capital leases [NOTE 8]......... 12,049 12,416
Note payable ...................................................... 2,076 3,750
Total long-term debt......................................... 248,525 426,585
Less current installments.................................. 132,388 177,344
Long-term debt, excluding current
installments .................................................. 116,137 249,241
Portion of long-term debt allocated
to the Circuit City Group............................ $ 57,317 $ 213,719
In July 1994, the Company entered into a seven-year,
$100,000,000 unsecured bank term loan. The loan was restruc-
tured in August 1996 as a $100,000,000, six-year unsecured
bank term loan. Principal is due in full at maturity with interest
payable periodically at LIBOR plus 0.40 percent. At February 28,
2001, the interest rate on the term loan was 5.97 percent.
In May 1995, the Company entered into a five-year,
$175,000,000 unsecured bank term loan. As scheduled, the
Company used existing working capital to repay this term loan
in May 2000.
In June 1996, the Company entered into a five-year,
$130,000,000 unsecured bank term loan. Principal is due in full
at maturity with interest payable periodically at LIBOR plus 0.35
percent. At February 28, 2001, the interest rate on the term loan
was 5.73 percent. This term loan is due in June 2001 and was
classified as a current liability at February 28, 2001. Although
the Company has the ability to refinance this loan, it intends to
repay the debt using existing working capital.
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 revolv-
ing credit agreement at February 28, 2001, or February 29, 2000.
The Industrial Development Revenue Bonds are collateralized
by land, buildings and equipment with an aggregate carrying
value of approximately $6,243,000 at February 28, 2001, and
$8,404,000 at February 29, 2000.
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 28, 2001,
and February 29, 2000.
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CIRCUIT CITY STORES, INC. 2001 ANNUAL REPORT