Circuit City 2004 Annual Report Download - page 49

52
2004 2003
---- ----
Land and buildings $48,580 $46,898
Furniture and fixtures, office, computer and other equipment and software 71,653 78,327
Leasehold improvements 11,187 14,010
------ ------
131,420 139,235
Less accumulated depreciation and amortization 65,857 70,588
------ ------
Property, plant and equipment, net $65,563 $68,647
======= =======
3.
BUSINESS COMBINATIONS AND GOODWILL
Effective January 1, 2002, the Company adopted SFAS 142 which established new accounting and reporting
requirements for goodwill and other intangible assets. SFAS 142 requires that goodwill amortization be
discontinued and replaced with periodic tests of impairment. With the adoption of SFAS 142, management
determined that the carrying value of goodwill was impaired at the date of adoption. As required by SFAS 142,
the entire carrying value of goodwill was written off. This write-off, $68 million ($51 million or $1.50 per share,
net of tax), was reported as a cumulative effect of a change in accounting principle, on a net of tax basis, in the
Company's Consolidated Statement of Operations for the year ended December 31, 2002. The adoption of SFAS
142 had no cash flow impact on the Company.
During the second quarter of 2003, the Company purchased the minority ownership of its Netherlands subsidiary
pursuant to the terms of the original purchase agreement for approximately $2.6 million. All of the purchase price
was attributable to goodwill and, as a result of an impairment analysis, was written off in accordance with SFAS
142 during that quarter.
4.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, net consists of the following (in thousands):
5.
RELATED PARTY TRANSACTIONS
The Company leased one warehouse and office facility from affiliates during the year ended December 31, 2004
(see Note 10) and vacated a second warehouse and office facility leased from affiliates during 2002. Rent
expense under those leases aggregated approximately $612,000 (2004), $612,000 (2003) and $1,071,000 (2002).
6.
CREDIT FACILITIES
The Company maintains a $70,000,000 revolving credit agreement with a group of financial institutions which
provides for borrowings in the United States. The borrowings are secured by all of the domestic accounts
receivable and inventories of the Company and the Company's shares of stock in its domestic subsidiaries. The
credit facility expires and outstanding borrowings thereunder are due on September 30, 2006. The borrowings
under the agreement are subject to borrowing base limitations of up to 75% of eligible accounts receivable and up
to 25% of qualified inventories. The interest on outstanding advances is payable monthly, at the Company's
option, at the agent bank's base rate (5.25% at December 31, 2004) plus 0.25% to 0.75% or the bank's daily
LIBOR rate (4.15% at December 31, 2004) plus 2.25% to 3%. The facility also calls for a commitment fee
payable quarterly in arrears of 0.5% of the average daily unused portion of the facility. The revolving credit
agreement contains certain financial and other covenants, including restrictions on capital expenditures and
payments of dividends. The Company was in compliance with all of the covenants as of December 31, 2004. As
of December 31, 2004, availability under the agreement was $54.6 million and there were outstanding letters of
credit of $9.1 million. As of December 31, 2003, availability under the agreement was $49.0 million and there
were outstanding letters of credit of $8.0 million. There were no outstanding advances as of December 31, 2004
and December 31, 2003.