CarMax 2009 Annual Report Download - page 66

60
10. DEBT
As of February 28 or 29
(In thousands) 2009 2008
Revolving credit agreement......................................................................................... $ 308,478 $ 300,217
Obligations under capital leases .................................................................................. 28,569 27,614
Total debt..................................................................................................................... 337,047 327,831
Less short-term debt and current portion:
Revolving credit agreement.................................................................................... 158,478 100,217
Obligations under capital leases............................................................................. 507 461
Total long-term debt, excluding current portion.......................................................... $ 178,062 $ 227,153
We have a $700 million revolving credit facility (the “credit facility”) with Bank of America, N.A. and various other
financial institutions. The credit facility is secured by vehicle inventory and contains customary representations and
warranties, conditions and covenants. The financial covenants include a maximum total liabilities to tangible net
worth ratio and a minimum fixed charge coverage ratio. Borrowings under this credit facility are limited to 80% of
qualifying inventory, and they are available for working capital and general corporate purposes. Borrowings accrue
interest at variable rates based on LIBOR, the federal funds rate, or the prime rate, depending on the type of
borrowing. We pay a commitment fee on the used and unused portions of the available funds. All outstanding
principal amounts will be due and payable in December 2011, and there are no penalties for prepayment.
As of February 28, 2009, $308.5 million was outstanding under the credit facility and $227.7 million of the
remaining borrowing limit was available to us. The outstanding balance included $0.9 million classified as short-
term debt, $157.6 million classified as current portion of long-term debt and $150.0 million classified as long-term
debt. We classified $157.6 million of the outstanding balance as of February 28, 2009, 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 3.5% in fiscal 2009, 5.9% in
fiscal 2008 and 6.4% in fiscal 2007.
We capitalize interest in connection with the construction of certain facilities. Capitalized interest totaled $1.9
million in fiscal 2009, $5.0 million in fiscal 2008 and $4.5 million in fiscal 2007.
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 $28.6 million as of
February 28, 2009, and $27.6 million as of February 29, 2008.
11. STOCK AND STOCK-BASED INCENTIVE PLANS
(A) Shareholder Rights 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.