CarMax 2005 Annual Report Download - page 44

42 CARMAX 2005
EARNINGS PER SHARE
CarMax was a wholly owned subsidiary of Circuit City during
a portion of fiscal 2003. Earnings per share for fiscal 2003 has
been presented to reflect the capital structure effective with the
separation of CarMax from Circuit City. All earnings per share
calculations have been computed as if the separation had
occurred at the beginning of fiscal 2003.
Reconciliations of the numerator and denominator of basic
and diluted earnings per share are presented below:
(In thousands except Years Ended February 28 or 29
per share data) 2005 2004 2003
Weighted average
common shares 104,036 103,503 102,983
Dilutive potential
common shares:
Options 1,728 2,113 1,579
Restricted stock 15 12 8
Weighted average
common shares and
dilutive potential
common shares 105,779 105,628 104,570
Net earnings available
to common
shareholders $112,928 $116,450 $ 94,802
Basic net earnings
per share $ 1.09 $ 1.13 $ 0.92
Diluted net earnings
per share $ 1.07 $ 1.10 $ 0.91
Certain options were outstanding and not included in the
computation of diluted earnings per share because the options’
exercise prices were greater than the average market price of the
common shares. Excluded from the computations were options
to purchase 26,580 shares of CarMax, Inc. common stock with
exercise prices ranging from $30.34 to $43.44 per share at the
end of fiscal 2005; options to purchase 18,364 shares with
exercise prices ranging from $35.23 to $43.44 per share at the
end of fiscal 2004; and options to purchase 1,053,610 shares with
exercise prices ranging from $18.60 to $43.44 per share at the
end of fiscal 2003.
LEASE COMMITMENTS
The company conducts most of its business in leased premises.
The company’s lease obligations are based upon contractual
minimum rates. CarMax operates 23 of its superstores pursuant
to various leases under which its former parent Circuit City was
the original tenant and primary obligor. Circuit City had
originally entered into these leases so that CarMax could take
advantage of the favorable economic terms available at that time
to Circuit City as a large retailer. Circuit City has assigned each
of these leases to CarMax. Despite the assignment and pursuant
to the terms of the leases, Circuit City remains contingently
liable under the leases. In recognition of this ongoing
contingent liability, CarMax made a one-time special dividend
payment of $28.4 million to Circuit City on the October 1,
2002, separation date.
Rent expense for all operating leases was $61.5 million in
fiscal 2005, $54.2 million in fiscal 2004, and $48.1 million in
fiscal 2003. Most leases provide that the company pay taxes,
maintenance, insurance, and operating expenses applicable to
the premises.The initial term of most real property leases will
expire within the next 20 years; however, most of the leases
have options providing for renewal periods of 5 to 20 years at
terms similar to the initial terms. For operating leases, rent is
recognized on a straight-line basis over the lease term, including
scheduled rent increases and rent holidays.
As of February 28, 2005, future minimum fixed lease
obligations, excluding taxes, insurance, and other costs payable
directly by the company, were approximately:
Capital Operating Lease
(In thousands) Leases Commitments
Fiscal 2006 $ 3,201 $ 61,312
Fiscal 2007 3,341 60,500
Fiscal 2008 3,341 60,305
Fiscal 2009 3,351 60,676
Fiscal 2010 3,503 61,323
Fiscal 2011 and thereafter 47,901 586,140
Total minimum lease payments 64,638 $890,256
Less amounts representing interest (35,889)
Present value of net minimum
capital lease payments [Note 9] $ 28,749
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