Filed by Circuit City Stores, Inc.
Pursuant to Rule 425 under the Securities Act of 1933
And deemed filed pursuant to Rule 14a-12
Of the Securities Exchange Act of 1934
Subject Company: Circuit City Stores, Inc.
Commission File No. 001-05767
CIRCUIT CITY STORES, INC. REPORTS FISCAL YEAR 2002 RESULTS
----------------------------------------------------------
FOR THE COMPANY, THE CIRCUIT CITY GROUP
---------------------------------------
AND THE CARMAX GROUP
--------------------
Richmond, Va., April 2, 2002 - Circuit City Stores, Inc. today released fourth
quarter and fiscal year 2002 results for the Circuit City Group (NYSE:CC) and
the CarMax Group (NYSE:KMX) and the consolidated results for Circuit City
Stores, Inc.
FOURTH QUARTER AND FISCAL YEAR 2002 RESULTS
Circuit City Stores, Inc.
-------------------------
Results for Circuit City Stores, Inc. include the total sales and earnings for
the company's Circuit City business and its CarMax business. Total sales for the
fourth quarter ended February 28, 2002, increased 9 percent to $4.17 billion
from $3.82 billion in last year's fourth quarter. Net earnings were $159.3
million compared with $103.2 million in the fourth quarter of fiscal 2001.
For the fiscal year ended February 28, 2002, total sales for Circuit City
Stores, Inc. declined 1 percent to $12.79 billion from $12.96 billion. Net
earnings were $218.8 million compared with $160.8 million last year.
Net earnings are allocated to the company's Circuit City Group and CarMax Group
stocks. Net earnings for the Circuit City Group include the earnings from the
company's Circuit City business and the earnings attributed to the CarMax Group
shares reserved for the Circuit City Group or for issuance to holders of Circuit
City Group stock. Net earnings for the CarMax Group reflect the remainder of the
earnings of the company's CarMax business.
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Page 2 of 17
In a public offering completed during the second quarter of fiscal year 2002,
Circuit City Stores, Inc. sold 9.5 million CarMax Group shares that had
previously been reserved for the Circuit City Group. With the impact of the
offering, 64.2 percent of CarMax's fourth quarter and 69.2 percent of CarMax's
fiscal 2002 earnings were attributed to the Circuit City Group stock. For the
same periods last year, 74.6 percent of the CarMax Group's earnings were
attributed to the Circuit City Group stock. At the end of the fiscal year, the
CarMax Group shares reserved for the Circuit City Group represented 64.1 percent
of the total CarMax Group shares outstanding and shares reserved for the Circuit
City Group.
As previously announced, the company's board of directors has authorized
management to initiate a process that would separate the CarMax auto superstore
business from the Circuit City consumer electronics business through a tax-free
transaction in which CarMax, Inc., presently a wholly owned subsidiary of
Circuit City Stores, Inc., would become a separate publicly traded company.
Accordingly, on March 29, 2002, CarMax, Inc. filed a registration statement,
including a preliminary proxy/prospectus, with the Securities and Exchange
Commission with regard to the transaction. The separation is expected to be
completed by late summer, subject to shareholder approval and final approval by
the board of directors.
Including the earnings from the company's Circuit City business and the earnings
attributed to the reserved CarMax Group shares, fourth quarter net earnings per
Circuit City Group share were 73 cents this year, compared with 49 cents last
year. Fourth quarter net earnings per CarMax Group share were 17 cents this
year, up 143 percent from 7 cents last year.
For the year, including the earnings from the Circuit City business and the
earnings attributed to the reserved CarMax Group shares, net earnings per
Circuit City Group share were 92 cents this year compared with 73 cents last
year. Net earnings per CarMax Group share were 82 cents this year, up 91 percent
from 43 cents in fiscal 2001. All per share amounts are presented on a diluted
basis.
Circuit City Group
------------------
Sales: Total sales for the Circuit City Group increased 7 percent in the fourth
quarter ended February 28, 2002, to $3.39 billion from $3.18 billion in the same
period of last year. Comparable store sales increased 6 percent.
For the fiscal year, total sales for the Circuit City Group declined 8 percent
to $9.59 billion from $10.46 billion. Comparable store sales declined 10 percent
for the year. Excluding the major appliance category, from which the company
completed its exit in early November 2000, comparable store sales declined 4
percent in fiscal 2002.
Net earnings: Excluding the earnings attributed to the reserved CarMax Group
shares, the Circuit City business produced earnings of $140.9 million, or 67
cents per Circuit City Group share, in the fourth quarter ended February 28,
2002, compared with $95.4 million, or 46 cents per share, last year. Including
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Page 3 of 17
earnings attributed to the reserved CarMax Group shares, fourth quarter net
earnings for the Circuit City Group were $152.7 million, or 73 cents per Circuit
City Group share, compared with $101.2 million, or 49 cents per share, last
year.
For the fiscal year, the Circuit City business produced earnings of $128.0
million, or 62 cents per Circuit City Group share, this year compared with
$115.2 million, or 56 cents per share, last year. Including the CarMax earnings
attributed to the Circuit City Group stock, full year net earnings for the
Circuit City Group were $190.8 million, or 92 cents per share, in fiscal 2002
versus $149.2 million, or 73 cents per share, in fiscal 2001.
The results for the fiscal years ended February 28, 2002, and February 28, 2001,
were reduced by costs associated with the exit from the appliance business,
remodels and relocations. The fiscal 2001 results also were reduced by the
estimated sales disruption caused by the appliance exit and costs associated
with a workforce reduction. As detailed in the following table, these costs
reduced earnings per Circuit City Group share by 3 cents in the fourth quarter
of fiscal 2002 and 2 cents in the fourth quarter of fiscal 2001. For the year,
these costs reduced Circuit City Group earnings per share by 9 cents in fiscal
2002 and 44 cents in fiscal 2001.
Earnings (Loss) per Share - Circuit City Group
Fourth Quarter Ended Fiscal Year Ended
February 28 February 28
----------- -----------
2002 2001 2002 2001
---- ---- ---- ----
Circuit City business $0.70 $0.48 $0.71 $1.00
Appliance exit related costs:
Appliance exit costs (0.03) -- (0.03) (0.09)
Appliance merchandise markdowns (a) -- -- -- (0.08)
Estimated sales disruption -- -- -- (0.03)
Partial remodeling costs (b) -- -- -- (0.09)
Remodel and relocation costs (b) -- -- (0.06) (0.13)
Workforce reduction costs (b) -- (0.02) -- (0.02)
Reserved interest in CarMax 0.06 0.03 0.30 0.17
------ ------- ------ ------
Circuit City Group $0.73 $0.49 $0.92 $0.73
(a) Reflected as a reduction in gross profit margin
(b) Reflected as an increase in selling, general and administrative expenses
CarMax Group
------------
Sales: Total sales for the CarMax Group rose 22 percent for the quarter ended
February 28, 2002, to $779.2 million from $640.0 million in the same period last
year. Comparable store unit sales rose 22 percent, and comparable store dollar
sales rose 23 percent. Comparable store used unit sales rose 23 percent, and
comparable store used dollar sales rose 25 percent. Comparable store new unit
sales rose 11 percent, and comparable store new dollar sales rose 12 percent.
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Circuit City Stores, Inc.
Page 4 of 17
For the fiscal year ended February 28, 2002, total sales for the CarMax Group
rose 28 percent to $3.20 billion from $2.50 billion in the prior year.
Comparable store unit sales rose 23 percent, and comparable store dollar sales
rose 28 percent. Comparable store used unit sales rose 24 percent, and
comparable store used dollar sales rose 30 percent. Comparable store new unit
sales rose 21 percent, and comparable store new dollar sales rose 24 percent.
Comparable Store Sales Growth
Fourth Quarter Ended Fiscal Year Ended
February 28 February 28
----------- -----------
2002 2001 2002 2001
---- ---- ---- ----
Vehicle dollars:
Used vehicles 25% 28% 30% 19%
New vehicles 12% 4% 24% 9%
Total 23% 23% 28% 17%
Vehicle units:
Used vehicles 23% 19% 24% 13%
New vehicles 11% 3% 21% 9%
Total 22% 17% 23% 12%
CarMax Group Earnings
(Amounts in millions except per share data) Fourth Quarter Ended Fiscal Year Ended
February 28 February 28
----------- -----------
2002 2001 2002 2001
---- ---- ---- ----
CarMax Group net earnings $18.4 $ 7.8 $90.8 $45.6
Net earnings attributed to the Circuit City Group stock $11.8 $ 5.8 $62.8 $34.0
Net earnings attributed to the CarMax Group stock $6.6 $ 2.0 $28.0 $11.6
CarMax Group diluted weighted average 38.6 27.0 34.1 27.0
shares outstanding
Net earnings per CarMax Group share $0.17 $0.07 $0.82 $0.43
Net Earnings: CarMax Group fourth quarter fiscal 2002 net earnings rose 136
percent to $18.4 million from $7.8 million in the fourth quarter of the prior
year. A write-off of goodwill associated with two underperforming new-car
franchises reduced fourth quarter fiscal year 2001 net earnings by $5.4 million.
In the fourth quarter of fiscal 2002, the net earnings attributed to the CarMax
Group stock were $6.6 million compared with $2.0 million in the fourth quarter
of the prior year. The remainder of the CarMax Group's net earnings is
attributed to the shares of CarMax Group stock reserved for issuance to the
holders of Circuit City Group stock or for the benefit of the Circuit City
Group. Net earnings per CarMax Group share rose to 17 cents from 7 cents.
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For fiscal 2002, CarMax Group net earnings rose 99 percent to $90.8 million from
$45.6 million in fiscal 2001. The fiscal 2001 net earnings reflect the $5.4
million reduction resulting from the goodwill write-off discussed above.
For fiscal 2002, net earnings attributed to the CarMax Group stock increased 142
percent to $28.0 million from $11.6 million in fiscal 2001. Net earnings per
CarMax Group share rose 91 percent to 82 cents per share from 43 cents per share
in fiscal 2001. The remainder of the CarMax Group earnings is attributed to the
shares reserved for the Circuit City Group as discussed above.
For the quarter and for the fiscal year, net earnings attributed to the CarMax
Group stock grew faster than total net earnings and net earnings per CarMax
Group share because of the impact of the second quarter public offering of
CarMax Group stock by Circuit City Stores, Inc. Under current accounting
standards, quarterly earnings per CarMax Group share are calculated by dividing
earnings attributed to the CarMax Group stock for the reported quarter by the
weighted average CarMax Group shares outstanding for the quarter. Year-to-date
earnings per share are calculated by dividing year-to-date earnings attributed
to the CarMax Group stock by the weighted average shares outstanding for the
full year. Therefore, year-to-date earnings per share do not equal the sum of
the quarterly earnings per share.
BUSINESS PERFORMANCE REVIEWS AND OUTLOOKS
-----------------------------------------
Circuit City Group Review
-------------------------
"As anticipated at the start of the year, the fourth quarter results for our
Circuit City business represented a solid improvement in both sales and earnings
trends from the earlier quarters of fiscal 2002," said W. Alan McCollough,
president and chief executive officer of Circuit City Stores, Inc. "During the
first half, we laid the groundwork for our second half improvement, with focused
initiatives to increase our traffic through more effective marketing and
increase our conversion rate with better customer service and merchandising.
"Throughout the fiscal year we consistently posted solid sales growth in new and
better-featured technologies such as big-screen and digital televisions, digital
satellite systems and wireless phones and in the categories such as digital
cameras, video games and DVD and PC software that were added or expanded
following our exit from the appliance business. A slowing economy, industry-wide
weakness in personal desktop computer sales, declining average retails for many
products and the absence of the major appliance business offset these strengths
during the first half, but we were pleased that our operating and marketing
initiatives generated positive comparable store sales growth for the second
half."
The Circuit City Group's gross profit margin was 24.3 percent in fiscal 2002,
compared with 23.6 percent in fiscal 2001. As previously announced, in the
fourth quarter of fiscal 2002, the Circuit City Group increased its liability
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Page 6 of 17
for lease termination costs related to the exit from the appliance business by
$10.0 million. These costs relate to distribution and service centers closed as
a part of that exit. Excluding the impact of these costs in fiscal 2002 and
other appliance exit related costs in fiscal 2001, the gross profit margin was
24.4 percent in fiscal 2002 and 24.1 percent in fiscal 2001.
"The solid sales growth we experienced throughout the year in new and
better-featured technologies, as well as weak sales in the lower-margin personal
computer category were the major contributors to the fiscal 2002 improvement in
the gross profit margin," said McCollough.
Gross Margin Components
Fourth Quarter Ended Fiscal Year Ended
February 28 February 28
----------- ------------
2002 2001 2002 2001
---- ---- ---- ----
Circuit City business 24.4% 24.4% 24.4% 24.1%
Appliance exit costs (0.3) -- (0.1) (0.3)
Appliance merchandise markdowns -- -- -- (0.2)
-----------------------------------------------------------
Gross profit margin 24.1% 24.4% 24.3% 23.6%
The expense ratio rose to 22.1 percent of sales in fiscal 2002, compared with
21.7 percent of sales in fiscal 2001. The fiscal 2002 ratio includes costs of
$19.3 million associated with the remodeling of 24 Superstores and relocation of
eight Superstores. The fiscal 2001 ratio includes $41.9 million in remodeling
costs for 26 Superstores, $30.0 million in costs related to partial remodels
following the appliance exit and $5.0 million in severance costs associated with
the fiscal 2001 fourth quarter workforce reduction. Excluding these costs and
the estimated sales disruption during the partial remodeling, the expense ratio
would have been 21.9 percent in fiscal 2002 and 20.9 percent in fiscal 2001.
"The increase in the expense ratio is primarily a result of the full year
decline in comparable store sales," said McCollough. "We were able to partly
offset this lost leverage through cost control and productivity initiatives,
including more efficient advertising expenditures. The declines in interest
rates helped generate a higher contribution from our finance operation for the
full year. Profits from our finance operation are recorded as a reduction to
selling, general and administrative expenses."
Expense Ratio Components
Fourth Quarter Ended Fiscal Year Ended
February 28 February 28
----------- ------------
2002 2001 2002 2001
---- ---- ---- ----
Circuit City business 17.4% 19.3% 21.9% 20.9%
Remodel and relocation costs -- -- 0.2 0.4
Partial remodeling costs -- -- -- 0.3
Estimated sales disruption -- -- -- 0.1
Workforce reduction costs -- 0.2 -- --
-------------------------------------------------------------
Expense ratio 17.4% 19.5% 22.1% 21.7%
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Page 7 of 17
Circuit City Group Fiscal Year 2003 Expectations
------------------------------------------------
Sales Expectations: "We believe that we can achieve comparable store sales
growth in the mid-single digits for fiscal 2003," said McCollough. "We expect
that this growth will reflect our renewed commitment to customer service as well
as additional initiatives designed to enhance our business in fiscal 2003. We
anticipate that comparable store sales will be driven by our expanded categories
and by the industry's high-growth categories, including big-screen televisions,
digital imaging, video gaming and wireless communications. Given the softer
comparisons, we expect comparable store sales growth in the high-single digits
during the first two quarters followed by growth in the mid-single digits for
the second half. With limited geographic expansion, we anticipate that total
sales growth will only slightly exceed comparable store sales growth throughout
the year.
Earnings Expectations: "As indicated in an earlier release, assuming relatively
flat gross profit margins and mid-single-digit comparable store sales growth, we
anticipate that the Circuit City business will contribute 75 cents per share to
85 cents per share before remodeling expense to the fiscal 2003 earnings of the
Circuit City Group," said McCollough. "These expectations reflect a modest
increase in our advertising expenses as we explore more ways to reach our core
customers as well as upgrades to store and distribution management information
systems.
"For fiscal 2003, we expect that the quarterly pattern of results, excluding
remodeling costs, will be similar to the fiscal 2002 pattern. We expect the
first quarter to result in a mid- to high-single digit loss per share. The
anticipated first quarter loss includes an estimated reduction in the
contribution from our finance operation given anticipated increases in funding
costs and expenses associated with a planned new securitization agreement. We
anticipate a relatively stable contribution from our finance operation for the
full year," said McCollough. "We expect the first quarter loss to be more than
offset by small profits in the second and third quarters. Similar to last year,
most of this year's earnings is expected to occur in the fourth quarter.
"As previously announced, we plan to open approximately 10 stores, remodel
approximately 300 stores and relocate an estimated 10 stores in this fiscal
year," said McCollough. "The fiscal 2003 remodel plan is the first step in a
three-year plan under which we will remodel these stores to resemble last year's
full remodels in Chicago and Virginia. Our analysis of the incremental sales and
profits produced by these remodels clearly indicates that their returns will
easily exceed our cost of capital.
"We expect the fiscal 2003 remodeling, which will consist of full-store lighting
upgrades and the rollout of a new video department that highlights the exciting
technology in this category, to be substantially complete by the end of
September," said McCollough. We expect similar remodeling costs in fiscal years
2004 and 2005 as we complete remodeling of these 300 stores. We also continue to
examine the remaining store base to determine a longer-term plan for further
remodeling and relocation. Remodeling and relocation expenses for the year are
estimated at 18 cents per share. We will incur a modest amount of remodeling
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Circuit City Stores, Inc.
Page 8 of 17
expense in the first quarter as we begin our remodeling program with
approximately 20 stores. The majority of the expenses are expected to occur in
the second and third quarters, with the current remodel schedule placing more of
the expense in the second quarter than in the third. Including remodeling and
relocation expenses, we expect the Circuit City business to contribute 57 cents
to 67 cents per share to the earnings of the Circuit City Group in fiscal 2003.
The company also anticipates that CarMax will contribute 30 cents to 32 cents
per share to the fiscal 2002 earnings of the Circuit City Group, without giving
effect to the planned separation. Reflecting the seasonal pattern of CarMax's
earnings, the majority of this contribution would be produced in the first and
second quarters.
"After an exciting year, we remain focused on strategies that will create
contemporary store environments enabling our customers to make well-informed and
exciting consumer electronics purchases," said McCollough. "We expect to drive
sales in important product categories by leveraging our improved supply chain
and marketing programs in fiscal 2003. Initiatives such as direct-to-store
delivery, improved warehouse management systems and ongoing improvements to
inventory forecasting should help to minimize inventory shortages and to
facilitate continued sales growth in our new and expanded product categories. We
plan to continue developing our marketing program with multiple vehicles and
competitive promotions and strengthen our in-store service with strong sales
training programs focused on product knowledge. We will continue to look for
ways to improve the cost efficiency of our business and to take advantage of the
industry's growth opportunities in fiscal 2003."
CarMax Group Review
Operating Ratios
Fourth Quarter Ended Fiscal Year Ended
February 28 February 28
----------- -----------
2002 2001 2002 2001
---- ---- ---- ----
Net sales and operating revenues 100.0% 100.0% 100.0% 100.0%
Gross profit margin 12.9% 12.8% 12.6% 13.2%
Expense ratio 9.0% 10.4% 7.9% 9.8%
Operating profit margin (a) 3.8% 2.4% 4.7% 3.4%
Net after-tax margin 2.4% 1.2% 2.8% 1.8%
(a) Operating profit margin equals earnings before interest and taxes as a
percent of net sales and operating revenues.
For the quarter, CarMax produced pretax earnings of $29.7 million, a 137 percent
increase from $12.5 million in the fourth quarter of the prior year. For fiscal
2002, pretax earnings were $146.5 million, up 99 percent from $73.5 million in
fiscal 2001.
"CarMax produced exceptionally strong used- and new-car sales growth in every
quarter of fiscal 2002, virtually all of which was comparable store sales
growth," said W. Austin Ligon, president of CarMax. "Our powerful consumer offer
continued to generate especially strong used-car unit comparable store sales
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Page 9 of 17
growth. The additional traffic that resulted from new-car manufacturer
zero-percent financing incentives gave an added boost to both used- and new-car
sales in the third quarter and early in the fourth quarter.
"In the fourth quarter, as we have throughout the year, we met our targets for
average gross margin dollars per used unit. Our strong used unit comparable
store sales growth generated considerable leverage of fixed expenses and
corporate overhead, helping to produce a fourth quarter expense ratio of 9.0
percent and a fiscal 2002 expense ratio of 7.9 percent," said Ligon. "As we did
in fiscal 2001, we also benefited from mild winter weather in the fourth quarter
and experienced no sales interruptions of any consequence in any of our
superstores." The fourth quarter and full year fiscal 2001 expense ratios
include an $8.7 million pretax write-off of goodwill associated with two
underperforming new-car franchises.
CarMax Group Fiscal 2003 Expectations
-------------------------------------
Sales Expectations: "We expect fiscal 2003 to be a year of strong growth for
CarMax," said Ligon. "Last year's exceptional performance included unusually
high customer traffic in October, November, and December, driven by new-car
manufacturer zero-percent financing incentives. This extra traffic added sales
to the already strong trends established in the first two quarters. Nonetheless,
we believe that even against last year's strong comparisons, we can deliver
used-car unit comparable store sales growth in the low- to mid-teens in the
first half, moderating to high-single- to low-double-digits in the second half
of fiscal 2003. With our expected new store openings, we now anticipate total
used-car sales growth in the 15 to 20 percent range for the year."
Earnings Expectations: "This strong used-car comparable store sales growth
should, we believe, produce earnings per CarMax Group share in the range of 95
cents to $1.00 for fiscal 2003," Ligon said. "For the first half of 2003, we
expect earnings per CarMax Group share to increase in the 15 percent to 20
percent range. For the third quarter, we expect earnings per share to be roughly
flat. For the fourth quarter, we expect the earnings per share growth rate to be
in the mid-teens. Second half earnings will be moderated by pre-opening and
grand-opening expenses of new stores. Further, we do not expect a repeat of last
year's windfall sales from the zero-percent financing traffic that benefited
October, November and December.
"We also noted throughout the year that our finance operation, CarMax Auto
Finance, benefited from favorable yield spreads that began in the fourth quarter
of fiscal 2001 and continued through fiscal 2002 as the Federal Reserve Board
attempted to moderate the economic decline through unprecedented decreases in
interest rates. As the market has anticipated an improving economy, we have
already seen increases in CarMax Auto Finance's cost of funds and anticipate
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Circuit City Stores, Inc.
Page 10 of 17
that the additional benefit derived from the lower cost of funds will diminish
in fiscal 2003. As a result, we now estimate that the fiscal 2003 contribution
from our finance operation will be approximately equal to the contribution in
fiscal 2002, despite anticipated higher financing volume consistent with our
expected sales increase. We are estimating that the excess spread will diminish
gradually during the course of the year.
"Also a factor in our earnings expectations for fiscal 2003 are additional
employee expenses, such as training and relocation, as we deepen our management
in preparation for future expansion. In addition, our expectations include
preliminary estimates of expenses expected to be incurred in the second half of
the fiscal year if the planned separation is approved," said Ligon. The CarMax
Group earnings per share estimate does not include the one-time costs associated
with the proposed CarMax separation. CarMax will absorb the separation costs,
which are estimated to be approximately $8 million, or 8 cents per CarMax Group
share. These costs are not tax deductible and would occur primarily in the
second quarter, with some costs occurring in the first quarter.
CarMax plans to open a used-car superstore in Roseville, Calif., in the
Sacramento market later this month. In addition, CarMax now expects to open four
to five used-car superstores in the second half of the fiscal year, including
entering the Knoxville, Tenn., and Las Vegas, Nev., markets and adding satellite
superstores in the Chicago, Ill., and Charlotte, N.C., markets. Adding a
satellite in Charlotte will help CarMax evaluate how much market share can
profitably be increased in mid-sized markets with the addition of a satellite
superstore.
CONFERENCE CALL INFORMATION
---------------------------
Circuit City will host a conference call for investors today, April 2, 2002, at
11:00 a.m. ET to discuss this morning's announcement. The conference call will
begin with a discussion of the CarMax Group's results, followed by a discussion
of the Circuit City Group's results.
Domestic investors may access the call at 1-888-455-0032 (passcode: Circuit
City). International investors should dial 1-712-257-2881 (passcode: Circuit
City). A live Web cast of the conference call will be available on the company's
investor information home pages at http://investor.CircuitCity.com or
http://investor.CarMax.com or at www.streetevents.com.
A replay of the call will be available beginning at approximately 2:00 p.m. ET
today and will run through midnight, April 9, 2002. Domestic investors may
access the recording at 1-800-839-3141 and international investors at
1-402-998-1687. No access code is required. A replay of the call also will be
available on the Circuit City Group and the CarMax Group's investor information
home pages or at www.streetevents.com.
Circuit City is a leading national retailer of brand-name consumer electronics,
personal computers and entertainment software. CarMax is the nation's leading
specialty retailer of used cars. With headquarters in Richmond, Va., Circuit
City Stores, Inc. operates 604 Circuit City Superstores and 20 mall-based
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Circuit City Express stores, giving it more locations in more markets than any
other consumer electronics specialty retailer. The company operates 40 CarMax
retail units in 38 locations, including 35 used-car superstores. CarMax also
operates 18 new-car franchises, 15 of which are integrated or co-located with
its used-car superstores. For more information, access the company's Web sites
at CircuitCity.com and CarMax.com.
This release contains forward-looking statements, which are subject to risks and
uncertainties, including, but not limited to, risks associated with plans to
separate the CarMax business from the company and create a separate publicly
traded company. Additional discussion of factors that could cause actual results
to differ materially from management's projections, forecasts, estimates and
expectations is contained in the company's SEC filings, including the
preliminary registration statement filed on March 29, 2002.
Contact: Ann Collier, Vice President of Financial and Public Relations,
Circuit City Stores, Inc., (804) 527-4058
Celeste Gunter, Director of Circuit City Investor Relations,
(804) 418-8237
Dandy Barrett, Director of CarMax Investor Relations, (804) 935-4591
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CIRCUIT CITY STORES, INC.
-------------------------
CONSOLIDATED STATEMENTS OF EARNINGS
-----------------------------------
PERIODS ENDED FEBRUARY 28
-------------------------
(Amounts in thousands except per share data)
Three Months Twelve Months
------------ -------------
2002 2001 2002 2001
---- ---- ---- ----
NET SALES AND OPERATING REVENUES $ 4,170,847 $ 3,817,127 $ 12,791,468 $ 12,959,028
Cost of sales, buying and warehousing 3,242,772 2,960,660 10,049,793 10,135,380
Appliance exit costs 10,000 - 10,000 28,326
--------------- -------------- ---------------- ---------------
GROSS PROFIT 918,075 856,467 2,731,675 2,795,322
Selling, general and
administrative expenses 660,431 685,555 2,372,941 2,514,912
Appliance exit costs - - - 1,670
Interest expense 719 4,518 5,839 19,383
--------------- -------------- ---------------- ---------------
EARNINGS BEFORE INCOME TAXES 256,925 166,394 352,895 259,357
Provision for income taxes 97,635 63,230 134,100 98,555
--------------- -------------- ---------------- ---------------
NET EARNINGS $ 159,290 $ 103,164 $ 218,795 $ 160,802
=============== ============== ================ ===============
Net earnings attributed to:
Circuit City Group Common Stock $ 152,708 $ 101,190 $ 190,799 $ 149,247
=============== ============== ================ ===============
CarMax Group Common Stock $ 6,582 $ 1,974 $ 27,996 $ 11,555
=============== ============== ================ ===============
Weighted average common shares:
Circuit City Group:
Basic 206,183 204,401 205,501 203,774
=============== ============== ================ ===============
Diluted 209,343 206,380 207,095 205,830
=============== ============== ================ ===============
CarMax Group:
Basic 36,597 25,579 32,140 25,554
=============== ============== ================ ===============
Diluted 38,586 27,026 34,122 26,980
=============== ============== ================ ===============
NET EARNINGS PER SHARE ATTRIBUTED TO:
Circuit City Group:
Basic $ 0.74 $ 0.50 $ 0.93 $ 0.73
=============== ============== ================ ===============
Diluted $ 0.73 $ 0.49 $ 0.92 $ 0.73
=============== ============== ================ ===============
CarMax Group:
Basic $ 0.18 $ 0.08 $ 0.87 $ 0.45
=============== ============== ================ ===============
Diluted $ 0.17 $ 0.07 $ 0.82 $ 0.43
=============== ============== ================ ===============
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CIRCUIT CITY STORES, INC.
-------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
(Amounts in thousands)
February 28
2002 2001
-------------- --------------
ASSETS
Current Assets:
Cash and cash equivalents $ 1,251,532 $ 446,131
Net accounts receivable 726,541 585,761
Inventory 1,633,327 1,757,664
Prepaid expenses and other current assets 41,311 57,623
------------------ -------------------
Total Current Assets 3,652,711 2,847,179
Property and equipment, net 853,778 988,947
Other assets 32,897 35,207
------------------ -------------------
TOTAL ASSETS $ 4,539,386 $ 3,871,333
================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current installments of long-term debt $ 102,073 $ 132,388
Accounts payable 1,106,679 902,560
Short-term debt 10,237 1,200
Accrued expenses and other current liabilities 284,032 162,972
Deferred income taxes 138,306 92,479
------------------ -------------------
Total Current Liabilities 1,641,327 1,291,599
Long-term debt, excluding current installments 14,064 116,137
Deferred revenue and other liabilities 149,269 92,165
Deferred income taxes 288 14,949
------------------ -------------------
TOTAL LIABILITIES 1,804,948 1,514,850
STOCKHOLDERS' EQUITY 2,734,438 2,356,483
------------------ -------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,539,386 $ 3,871,333
================== ===================
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Circuit City Stores, Inc.
Page 14 of 17
CIRCUIT CITY GROUP
------------------
STATEMENTS OF EARNINGS
----------------------
PERIODS ENDED FEBRUARY 28
-------------------------
(Amounts in thousands except per share data)
Three Months Twelve Months
------------ -------------
2002 2001 2002 2001
---- ---- ---- ----
NET SALES AND OPERATING REVENUES $ 3,391,689 $ 3,177,131 $ 9,589,803 $ 10,458,037
Cost of sales, buying and warehousing 2,563,805 2,402,733 7,251,831 7,964,148
Appliance exit costs 10,000 - 10,000 28,326
--------------- -------------- ---------------- ---------------
GROSS PROFIT 817,884 774,398 2,327,972 2,465,563
Selling, general and
administrative expenses 590,169 618,989 2,120,652 2,270,745
Appliance exit costs - - - 1,670
Interest expense 462 1,558 881 7,273
--------------- -------------- ---------------- ---------------
EARNINGS BEFORE INCOME TAXES AND
income attributed to THE reserved
CARMAX GROUP shares 227,253 153,851 206,439 185,875
Provision for income taxes 86,359 58,468 78,446 70,637
--------------- -------------- ---------------- ---------------
EARNINGS BEFORE INCOME attributed to
THE reserved CARMAX GROUP shares 140,894 95,383 127,993 115,238
Net earnings attributed to the
reserved Carmax Group shares 11,814 5,807 62,806 34,009
--------------- -------------- ---------------- ---------------
NET Earnings $ 152,708 $ 101,190 $ 190,799 $ 149,247
=============== ============== ================ ===============
Weighted average common shares:
Basic 206,183 204,401 205,501 203,774
=============== ============== ================ ===============
Diluted 209,343 206,380 207,095 205,830
=============== ============== ================ ===============
NET EARNINGS PER SHARE:
Basic $ 0.74 $ 0.50 $ 0.93 $ 0.73
=============== ============== ================ ===============
Diluted $ 0.73 $ 0.49 $ 0.92 $ 0.73
=============== ============== ================ ===============
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Circuit City Stores, Inc.
Page 15 of 17
CIRCUIT CITY GROUP
------------------
BALANCE SHEETS
--------------
(Amounts in thousands)
February 28
2002 2001
--------------- --------------
ASSETS
Current Assets:
Cash and cash equivalents $ 1,248,246 $ 437,329
Net accounts receivable 553,273 451,099
Merchandise inventory 1,234,243 1,410,527
Prepaid expenses and other current assets 39,246 55,317
------------------ -----------------
Total Current Assets 3,075,008 2,354,272
Property and equipment, net 732,802 796,789
Deferred income taxes 2,647 -
Reserved CarMax Group shares 311,386 292,179
Other assets 11,354 9,319
------------------ -----------------
TOTAL ASSETS $ 4,133,197 $ 3,452,559
================== =================
LIABILITIES AND GROUP EQUITY
Current Liabilities:
Current installments of long-term debt $ 23,465 $ 24,237
Accounts payable 1,019,519 820,077
Short-term debt 397 213
Accrued expenses and other current liabilities 258,257 146,818
Deferred income taxes 116,297 74,317
------------------ -----------------
Total Current Liabilities 1,417,935 1,065,662
Long-term debt, excluding current installments 14,064 33,080
Deferred revenue and other liabilities 140,853 85,329
Deferred income taxes - 11,329
------------------ -----------------
TOTAL LIABILITIES 1,572,852 1,195,400
GROUP EQUITY 2,560,345 2,257,159
------------------ -----------------
TOTAL LIABILITIES AND GROUP EQUITY $ 4,133,197 $ 3,452,559
================== =================
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Circuit City Stores, Inc.
Page 16 of 17
CARMAX GROUP
------------
STATEMENTS OF EARNINGS
----------------------
PERIODS ENDED FEBRUARY 28
-------------------------
(Amounts in thousands except per share data)
Three Months Twelve Months
------------ -------------
2002 2001 2002 2001
---- ---- ---- ----
NET SALES AND OPERATING REVENUES $ 779,158 $ 639,996 $ 3,201,665 $ 2,500,991
Cost of sales 678,967 557,927 2,797,962 2,171,232
--------------- ------------- -------------- --------------
GROSS PROFIT 100,191 82,069 403,703 329,759
Selling, general and
administrative expenses 70,262 66,566 252,289 244,167
Interest expense 257 2,960 4,958 12,110
--------------- ------------- -------------- --------------
EARNINGS BEFORE INCOME TAXES 29,672 12,543 146,456 73,482
Provision for income taxes 11,276 4,762 55,654 27,918
--------------- ------------- -------------- --------------
NET EARNINGS $ 18,396 $ 7,781 $ 90,802 $ 45,564
=============== ============= ============== ==============
Net earnings attributed to:
Circuit City Group
Common Stock $ 11,814 $ 5,807 $ 62,806 $ 34,009
=============== ============= ============== ==============
CarMax Group
Common Stock $ 6,582 $ 1,974 $ 27,996 $ 11,555
=============== ============= ============== ==============
Weighted average common shares:
Basic 36,597 25,579 32,140 25,554
=============== ============= ============== ==============
Diluted 38,586 27,026 34,122 26,980
=============== ============= ============== ==============
NET EARNINGS PER SHARE:
Basic $ 0.18 $ 0.08 $ 0.87 $ 0.45
=============== ============= ============== ==============
Diluted $ 0.17 $ 0.07 $ 0.82 $ 0.43
=============== ============= ============== ==============
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Circuit City Stores, Inc.
Page 17 of 17
CARMAX GROUP
------------
BALANCE SHEETS
--------------
(Amounts in thousands)
February 28
2002 2001
------------------ ---------------
ASSETS
Current Assets:
Cash and cash equivalents $ 3,286 $ 8,802
Net accounts receivable 173,268 134,662
Inventory 399,084 347,137
Prepaid expenses and other current assets 2,065 2,306
------------------- -----------------
Total Current Assets 577,703 492,907
Property and equipment, net 120,976 192,158
Other assets 21,543 25,888
------------------- -----------------
TOTAL ASSETS $ 720,222 $ 710,953
=================== =================
LIABILITIES AND GROUP EQUITY
Current Liabilities:
Current installments of long-term debt $ 78,608 $ 108,151
Accounts payable 87,160 82,483
Short-term debt 9,840 987
Accrued expenses and other current liabilities 25,775 16,154
Deferred income taxes 22,009 18,162
------------------- -----------------
Total Current Liabilities 223,392 225,937
Long-term debt, excluding current installments - 83,057
Deferred revenue and other liabilities 8,416 6,836
Deferred income taxes 2,935 3,620
------------------- -----------------
TOTAL LIABILITIES 234,743 319,450
GROUP EQUITY 485,479 391,503
------------------- -----------------
TOTAL LIABILITIES AND GROUP EQUITY $ 720,222 $ 710,953
=================== =================
###