CarMax 2001 Annual Report Download - page 81

3. BUSINESS ACQUISITIONS
The CarMax Group acquired the franchise rights and the related
assets of one new-car dealership for an aggregate cost of $1.3 mil-
lion in fiscal 2001, five new-car dealerships for an aggregate cost of
$34.8 million in fiscal 2000 and four new-car dealerships for an
aggregate cost of $49.6 million in fiscal year 1999. These acquisi-
tions were financed through available cash resources, including allo-
cated debt and, in fiscal 1999, the issuance of two promissory notes
aggregating $8.0 million. Costs in excess of the fair value of the net
tangible assets acquired (primarily inventory) have been recorded as
goodwill and covenants not to compete. These acquisitions were
accounted for under the purchase method and the results of the
operations of each acquired franchise were included in the accompa-
nying CarMax Group financial statements since the dates of acquisi-
tion. Unaudited pro forma information related to these acquisitions
is not included because the impact of these acquisitions on the
accompanying CarMax Group financial statements is not material.
4. 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) .............. $101,382 $ 81,885
Land held for sale.............................................. 27,971 41,850
Land held for development.............................. 4,285 17,697
Construction in progress .................................. 14,324 18,010
Furniture, fixtures and equipment
(3 to 8 years) ................................................ 64,866 60,225
Leasehold improvements
(10 to 15 years)............................................. 21,196 19,902
234,024 239,569
Less accumulated depreciation ....................... 41,866 27,713
Property and equipment, net........................... $192,158 $211,856
Land held for development is land owned for future sites
that are scheduled to open more than one year beyond the fiscal
year reported.
5. 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 .................... 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 CarMax Group................................. $191,208 $212,866
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.
In November 1998, the CarMax Group entered into a four-
year, unsecured $5,000,000 promissory note. Principal is due
annually with interest payable periodically at 8.25 percent.
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.
Short-term debt of the Company is funded through commit-
ted lines of credit and informal credit arrangements, as well as
the revolving credit agreement. Amounts outstanding and com-
mitted 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 CarMax
Group, excluding interest capitalized, was $12,110,000 in fiscal
2001, $10,362,000 in fiscal 2000 and $6,393,000 in fiscal 1999.
The CarMax Group capitalizes interest in connection with the
construction of certain facilities. There was no interest capitalized
in fiscal 2001. Interest capitalized amounted to $1,254,000 in
fiscal 2000 and $2,674,000 in fiscal 1999.
78
CIRCUIT CITY STORES, INC. 2001 ANNUAL REPORT