CarMax 2001 Annual Report Download - page 64

Circuit City Group
Short-term debt of the Company is funded through committed
lines of credit and informal credit arrangements, as well as the
revolving credit agreement. Amounts outstanding and committed
lines of credit available are as follows:
Years Ended
February 28 or 29
(Amounts in thousands) 2001 2000
Average short-term debt outstanding .......... $ 56,065 $ 44,692
Maximum short-term debt outstanding....... $365,275 $411,791
Aggregate committed lines of credit ............ $360,000 $370,000
The weighted average interest rate on the outstanding short-
term debt was 6.8 percent during fiscal 2001, 5.6 percent during
fiscal 2000 and 5.1 percent during fiscal 1999.
Interest expense allocated by the Company to the Circuit City
Group, excluding interest capitalized, was $7,273,000 in fiscal
2001, $13,844,000 in fiscal 2000 and $21,926,000 in fiscal 1999.
The Circuit City Group capitalizes interest in connection with the
construction of certain facilities and the development or purchase
of software for internal use. Interest capitalized amounted to
$2,121,000 in fiscal 2001, $2,166,000 in fiscal 2000 and
$2,749,000 in fiscal 1999.
5. INCOME TAXES
The components of the provision for income taxes on earnings
from continuing operations before the Inter-Group Interest in the
CarMax Group are as follows:
Years Ended February 28 or 29
(Amounts in thousands) 2001 2000 1999
Current:
Federal...................................... $52,846 $ 141,514 $123,001
State.......................................... 7,993 16,901 15,694
60,839 158,415 138,695
Deferred:
Federal...................................... 9,505 40,572 5,773
State.......................................... 293 1,256 178
9,798 41,828 5,951
Provision for income taxes......... $70,637 $200,243 $144,646
The effective income tax rate differed from the federal statutory
income tax rate as follows:
Years Ended February 28 or 29
2001 2000 1999
Federal statutory income tax rate........ 35.0% 35.0% 35.0%
State and local income taxes,
net of federal benefit........................ 3.0% 3.0% 3.1%
Effective income tax rate ...................... 38.0% 38.0% 38.1%
In accordance with SFAS No. 109, the tax effects of temporary
differences that give rise to a significant portion of the deferred
tax assets and liabilities at February 28 or 29 are as follows:
(Amounts in thousands) 2001 2000
Deferred tax assets:
Inventory ...................................................... $ — $ 7,264
Accrued expenses ........................................ 42,953 27,974
Other.............................................................. 7,311 7,167
Total gross deferred tax assets............. 50,264 42,405
Deferred tax liabilities:
Depreciation and amortization.................. 42,488 44,854
Deferred revenue ......................................... 32,825 29,656
Securitized receivables................................ 36,257 14,069
Inventory ...................................................... 9,927 —
Prepaid expenses ......................................... 10,788 23,023
Other.............................................................. 3,625 6,651
Total gross deferred tax liabilities....... 135,910 118,253
Net deferred tax liability.................................. $ 85,646 $ 75,848
Based on the Company’s historical and current pretax earn-
ings, management believes the amount of gross deferred tax
assets will more likely than not be realized through future tax-
able income; therefore, no valuation allowance is necessary.
6. ASSOCIATE BENEFIT AND STOCK INCENTIVE PLANS
(A) 401(k) PLAN: Effective August 1, 1999, the Company began
sponsoring a 401(k) Plan for all employees meeting certain eligi-
bility 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 expense
for this plan for Circuit City Group associates was $3,996,000 in
fiscal 2001 and $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 Common
Stock. The rights are exercisable only upon the attainment of, or
the commencement of a tender offer to attain, a specified own-
ership interest in the Company by a person or group. When
exercisable, each Circuit City Group right would entitle share-
holders 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 preferen-
tial dividend and liquidation rights, have been designated. No
such shares are outstanding. In the event that an acquiring per-
son 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 certain 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
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CIRCUIT CITY STORES, INC. 2001 ANNUAL REPORT