Circuit City 1999 Annual Report Download - page 24

NET INCOME PER COMMON SHARE
- The Company accounts for net income per share in accordance with Statement of Financial
Accounting Standard No. 128, "Earnings Per Share". Net income per common share-basic was calculated based upon the weighted average
number of common shares outstanding during the respective periods. Net income per common share-diluted was calculated based upon the
weighted average number of common shares outstanding and included the equivalent shares for dilutive options outstanding during the
respective periods.
The weighted average common shares outstanding for the computation of basic earnings per common share for 1999, 1998 and 1997 were 35.8
million, 37.3 million and 38.0 million, respectively. Additionally 42,000 (in1999), 16,000 (in 1998) and 262,000 (in 1997) of equivalent
common shares were included for the diluted calculation.
COMPREHENSIVE INCOME - In 1998, the Company adopted Statement of Financial Accounting Standard No. 130 "Reporting
Comprehensive Income". This statement establishes rules for the reporting of comprehensive income and its components. Comprehensive
income consists of net income and foreign currency translation adjustments and is included in the Consolidated Statements of Shareholders'
Equity. Comprehensive income was $33,355,000 in 1999, $42,335,000 in 1998 and $36,641,000 in 1997, net of tax effects on currency
translation adjustments of $1,593,000 in 1999, ($699,000) in 1998 and $1,469,000 in 1997.
USE OF ESTIMATES IN FINANCIAL STATEMENTS - The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
NEW ACCOUNTING PRONOUNCEMENTS
- In June 1998, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS No. 133). This standard was amended by
Statement of Financial Accounting Standards No. 137, Accounting for Derivative Instruments and Hedging Activities-- Deferral of the
Effective Date of FASB Statement No. 133 and defers the effective date for adoption to all fiscal years beginning after June 15, 2000. SFAS
No. 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other
contracts (collectively referred to as derivatives), and for hedging activities. The Company does not believe that these pronouncements will
have a material effect on its financial statements.
2. ACQUISITIONS
The Company acquired two businesses in 1999 for $12.2 million in cash, two businesses in 1998 for $5.9 million in cash and three businesses
in 1997 for $50.8 million in cash and stock. These acquisitions were accounted for as purchases, and accordingly, the assets and liabilities of
the acquired entities have been recorded at their estimated fair values at the dates of acquisition. The excess of purchase price over the
estimated fair values of net assets acquired, in the amount of $17.0 million in 1999, $5.2 million in 1998 and $15.9 million in 1997 has been
recorded as goodwill and is being amortized over the estimated useful lives.
The largest acquisition in 1997, Infotel Inc., included a provision for payment of additional consideration to the former shareholders if the
acquired entity's results of operations exceeded certain targeted levels. Additional consideration of $2 million was earned in 1999 (payable in
2000) and $9 million was earned in 1998 (paid in 1999) and were recorded as increases to the purchase price. During 1998 the estimated fair
values of the net assets recorded at the date of acquisition for Infotel, Inc. were further evaluated by the Company and, in accordance with
Statement of Financial Accounting Standard No. 38, "Accounting for Pre Acquisition Contingencies of Purchased Enterprises", goodwill was
reduced by approximately $10.7 million.
The pro forma results for 1999, 1998 and 1997, assuming these acquisitions had been made at the beginning of the period, would not have been
materially different from the reported results.
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, net consists of the following (in thousands):
1999 1998
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Land and buildings............................... $ 11,348 $ 8,324
Furniture and fixtures, office, computer and
warehouse equipment 55,825 42,471
Leasehold improvements........................... 10,774 7,871
Transportation equipment......................... 2,529 2,111
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80,476 60,777
Less accumulated depreciation and amortization 33,637 26,789
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Property, plant and equipment, net............... $ 46,839 $ 33,988
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4. RELATED PARTY TRANSACTIONS