CarMax 2011 Annual Report Download - page 77

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11. DEBT
(In thousands)
Revolving credit agreement 1,002$ 122,483$
Non-recourse notes payable 4,013,661 ―
Obligations under capital leases 29,122 28,088
Total debt 4,043,785 150,571
Less short-term debt and current portion:
Revolving credit agreement 1,002 122,483
Non-recourse notes payable 132,519 ―
Obligations under capital leases 772 717
Total debt, excluding current portion 3,909,492$ 27,371$
As of February 28
2011
2010
Revolving Credit Facility. 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 certain 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, 2011, $1.0 million of short-term debt was outstanding under the credit facility and the remaining
capacity was fully available to us.
The weighted average interest rate on outstanding short-term and long-term debt was 1.6% in fiscal 2011, 1.6% in
fiscal 2010 and 3.5% in fiscal 2009.
We capitalize interest in connection with the construction of certain facilities. Capitalized interest totaled $0.1
million in fiscal 2011, $0.3 million in fiscal 2010 and $1.9 million in fiscal 2009.
Capital Leases. We have recorded six capital leases for current and future 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 $29.1 million as of February 28, 2011, and $28.1 million as of February 28, 2010.
Non-Recourse Notes Payable. As of March 1, 2010, and as discussed in Notes 2 and 5, we adopted ASU Nos.
2009-16 and 2009-17 and amended our warehouse facility agreement in effect as of that date. As a result, we
consolidated the auto loan receivables previously securitized through that warehouse facility and term
securitizations, along with the related non-recourse notes payable, and they are now accounted for as secured
borrowings. The timing of principal payments on the non-recourse notes payable are based on principal collections,
net of losses, on the securitized auto loan receivables. The non-recourse notes payable accrue interest
predominantly at fixed rates and mature between April 2011 and March 2017, but may mature earlier or later,
depending upon the repayment rate of the underlying auto loan receivables. As of February 28, 2011, $4.01 billion
of non-recourse notes payable were outstanding. The outstanding balance included $132.5 million classified as
current portion of non-recourse notes payable, as this represents principal payments that have been collected, but
will be distributed in the following period.
As of February 28, 2011, the combined warehouse facility limit was $1.6 billion. At that date, $943 million of auto
loan receivables were funded in the warehouse facilities and unused warehouse capacity totaled $657 million.
During the first quarter of fiscal 2011, we entered into a second warehouse facility agreement in order to stagger the
warehouse facility renewal dates, reduce risk and provide greater flexibility. During the second quarter of fiscal
2011, we renewed our $800 million warehouse facility that was scheduled to expire in August 2010 for an additional
364-day term, and we increased the capacity of our second warehouse facility by $400 million. As of
February 28, 2011, $800 million of the warehouse facility limit will expire in August 2011 and $800 million will
expire in February 2012. The return requirements of investors in the bank conduits could fluctuate significantly
depending on market conditions. At renewal, the cost, structure and capacity of the facilities could change. These