CarMax 2008 Annual Report Download - page 66

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As of February 29, 2008, $300.2 million was outstanding under the credit agreement, with the remainder fully
available to us. The outstanding balance included $21.0 million classified as short-term debt, $79.2 million
classified as current portion of long-term debt and $200.0 million classified as long-term debt. We classified $79.2
million of the outstanding balance as of February 29, 2008, as current portion of long-term debt based on our
expectation that this balance will not remain outstanding for more than one year.
The weighted average interest rate on outstanding short-term and long-term debt was 5.9% in fiscal 2008, 6.4% in
fiscal 2007 and 5.5% in fiscal 2006.
We capitalize interest in connection with the construction of certain facilities. Capitalized interest totaled $5.0
million in fiscal 2008, $4.5 million in fiscal 2007 and $6.0 million in fiscal 2006.
We have recorded five capital leases for store facilities. The related capital lease assets are included in property and
equipment. These leases were structured at varying interest rates with initial lease terms ranging from 15 to 20 years
with payments made monthly. The present value of future minimum lease payments totaled $27.6 million as of
February 29, 2008, and $34.8 million as of February 28, 2007.
10. STOCK AND STOCK-BASED INCENTIVE PLANS
(A) Shareholder Right Plan and Undesignated Preferred Stock
In conjunction with our shareholder rights plan, shareholders received preferred stock purchase rights as a dividend
at the rate of one right for each share of CarMax, Inc. common stock owned. The rights are exercisable only upon
the attainment of, or the commencement of a tender offer to attain, a 15% or greater ownership interest in the
company by a person or group. When exercisable, and as adjusted for our March 2007 2-for-1 stock split, each right
would entitle the holder to buy one half of one one-thousandth of a share of Cumulative Participating Preferred
Stock, Series A, $20 par value, at an exercise price of $140 per share, subject to adjustment. A total of 120,000
shares of such preferred stock, which has preferential dividend and liquidation rights, have been authorized and
designated. No such shares are outstanding. In the event that an acquiring person or group acquires the specified
ownership percentage of CarMax, Inc. 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 CarMax, Inc. common stock valued at two times the exercise price. We also have an additional
19,880,000 authorized shares of undesignated preferred stock of which no shares are outstanding.
(B) Stock Incentive Plans
We maintain long-term incentive plans for management, key employees and the nonemployee members of our board
of directors. The plans allow for the grant of equity-based compensation awards, including nonqualified stock
options, incentive stock options, stock appreciation rights, restricted stock awards, stock grants or a combination of
awards. To date, we have awarded no incentive stock options.
In fiscal 2006 and prior years, we primarily awarded stock options to employees that received share-based
compensation. Beginning in fiscal 2007, the majority of employees receiving awards now receive restricted stock
instead of stock options. Senior management continues to receive awards of nonqualified stock options.
Nonemployee directors continue to receive awards of nonqualified stock options and stock grants.
Stock options are awards that allow the recipient to purchase shares of our stock at a fixed price. Stock options are
granted at an exercise price equal to the fair market value of our stock on the grant date. Substantially all of the
stock options vest annually in equal amounts over periods of three to four years. These options generally expire no
later than ten years after the date of the grant. Restricted stock awards are subject to specified restrictions and a risk
of forfeiture. The restrictions typically lapse three years from the grant date.
As of February 29, 2008, a total of 34,000,000 shares of CarMax common stock have been authorized to be issued
under the long-term incentive plans. The number of unissued common shares reserved for future grants under the
long-term incentive plans was 7,656,307 as of February 29, 2008.