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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended February 29, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission File No.: 1-5767
CIRCUIT CITY STORES, INC.
(Exact name of Registrant as specified in its charter)
VIRGINIA 54-0493875
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
9950 Mayland Drive
Richmond, VA 23233
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (804) 527-4000
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
Common Stock, Par Value $0.50 New York Stock Exchange
Rights to Purchase Preferred Stock,
Series E, Par Value $20.00 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [ ].
On May 3, 1996, the Company had 97,576,474 common shares outstanding.
The aggregate market value of the common shares held by non-affiliates (without
admitting that any person whose shares are not included in determining such
value is an affiliate) was $2,924,887,420 based upon the closing price of these
shares as reported by the New York Stock Exchange on May 3, 1996.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference in
Parts I, II, III, and IV of this Form 10-K Report: (1) Pages 17 through 33 of
the Company's Annual Report to Shareholders for the fiscal year ended February
29, 1996 (Parts I, II and IV) and (2) "Election of Directors," "Beneficial
Ownership of Securities," "Executive Compensation," "Employment Agreements and
Change-in-Control Arrangements," "Compensation of Directors" and "Section 16(a)
Compliance" in the May 10, 1996 Proxy Statement, furnished to shareholders of
the Company in connection with the 1996 Annual Meeting of such shareholders
(Part III).
Page 1 of 14
TABLE OF CONTENTS
Item Page
PART I
1. Business 3
2. Properties 7
3. Legal Proceedings 9
4. Submission of Matters to a Vote of Security Holders 9
PART II
5. Market for the Company's Common Equity and Related Stockholder Matters 10
6. Selected Financial Data 10
7. Management's Discussion and Analysis of Results of Operations and Financial Condition 10
8. Financial Statements and Supplementary Data 11
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 11
PART III
10. Directors and Executive Officers of the Company 11
11. Executive Compensation 11
12. Security Ownership of Certain Beneficial Owners and Management 11
13. Certain Relationships and Related Transactions 11
PART IV
14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K 12
Page 2 of 14
PART I
Item 1. Business.
Circuit City Stores, Inc. (the Company) was incorporated under the laws of
Virginia in 1949. Its corporate headquarters is located at 9950 Mayland Drive,
Richmond, Va. The Company's retail operations consist of Circuit City
Superstores, Circuit City electronics-only stores and mall-based Circuit City
Express stores. The Company has a wholly owned credit card bank subsidiary,
First North American National Bank, that extends consumer credit. In addition,
the Company operates CarMax, a retail Superstore format selling late-model used
cars.
General. The Company is the nation's largest retailer of brand-name
consumer electronics and major appliances and a leading retailer of personal
computers and music software. It sells video equipment, including televisions,
digital satellite systems, video cassette recorders and camcorders; audio
equipment, including home stereo systems, compact disc players, tape recorders
and tape players; mobile electronics, including car stereo systems and security
systems; home office products, including personal computers, peripheral
equipment and facsimile machines; other consumer electronics products, including
cellular phones, telephones and portable audio and video products; entertainment
software; and major appliances, including washers, dryers, refrigerators,
microwave ovens and ranges. Music software, including compact discs and audio
tapes, was available in approximately three-quarters of the Superstores at April
30, 1996.
Each of the Company's store locations follows detailed operating
procedures and merchandising programs. Included are procedures for inventory
maintenance, advertising, customer relations, store administration, merchandise
display, store security and the demonstration and sale of products. Each store
carries a standard line of products selected at the corporate level and supplied
directly to the stores by the Company's regional warehouse distribution
facilities.
Expansion. The Company's goal is to maximize profitability in each market
it serves by capturing large market shares that produce high sales volumes
across a broad merchandise mix.
Merchandising. Because the Company believes that local markets have
individual characteristics which vary greatly by the advertising, merchandising
and pricing strategies of competitors, it has organized its marketing function
to focus on markets with similar competitive conditions. The Company's operating
regions benefit from a centralized buying organization. The central buying staff
reduces costs by purchasing in large volumes, structures a sound basic
merchandising program and is supported by advanced management information and
distribution systems.
The Company's merchandising strategy emphasizes a broad selection of
products, including introductory products, and a wide range of prices.
Merchandise mix and displays are controlled centrally in an effort to ensure a
high level of consistency from store to store. Merchandise pricing and selling
strategies vary by market to reflect competitive conditions.
Although suggested retail prices are established by the Company's central
merchandising department, each store manager is responsible for shopping the
local competition on a regular basis and has the authority to adjust retail
prices to meet market conditions. As part of its competitive strategy, the
Company advertises low prices and provides each customer with a low-price
guarantee. The Company will beat any legitimate price from a local competitor
stocking the same new item in a factory-sealed box. If a customer finds a lower
price, including the Company's own sale price, within 30 days, the Company will
refund 110 percent of the difference to the customer.
Suppliers. During fiscal 1996, the Company's 10 largest suppliers
accounted for approximately 52 percent of merchandise purchased by the Company.
The Company's major suppliers include Sony, Packard Bell, Thomson, Panasonic,
Hitachi, NEC, Whirlpool, Hewlett Packard, Zenith, and JVC. Brand-name advertised
products are sold by all of the Company's retail locations. The Company has no
significant long-term contracts for the purchase of merchandise.
In the past, the Company has not experienced any continued or ongoing
difficulty obtaining satisfactory sources of supply and believes that adequate
sources of supply exist for the types of merchandise sold in its stores.
Page 3 of 14
Advertising. The Company relies on considerable amounts of advertising to
stimulate Superstore and electronicsonly store sales. Expenditures for these
items were 4.6 percent of sales in fiscal 1996 (4.7 percent and 5.1 percent in
fiscal 1995 and 1994, respectively). The reduction in advertising as a percent
of sales was primarily due to comparable store sales growth. Also, as the
Company adds new stores in existing markets, the increased sales volume improves
the efficiency of existing advertising expenditures. The Company primarily uses
print advertising, including multi-page vehicles and run-of-press newspaper ads,
for Superstore and electronics-only store advertising. The Company emphasizes
the use of multi-page vehicles to allow a more extensive presentation of the
broad selection of products and price ranges it carries. These multi-page
vehicles are generally distributed in newspapers but are, in some cases, mailed
directly to residences outside the newspapers' area of circulation. With a
presence in most major metropolitan markets, the Company has begun, on a limited
basis, to take advantage of national broadcast and print advertising
opportunities. Television campaigns include merchandise assortment, price and
customer service messages.
Competition. The brand-name consumer electronics and major appliance
business engaged in by the Company is highly competitive. The Company's
competitors include other full-service retailers, self-service retailers,
specialty retailers with differing product selections and services, general
merchandise retailers and local independent operators. Over the past three
years, the Company's competition has shifted to include more self-service
retailers that often offer a more limited product selection but at highly
competitive prices.
The Company uses pricing, selection and service to differentiate itself
from the competition. As part of its competitive strategy, the Company strives
to maintain highly competitive prices and offers every customer the low-price
guarantee previously described. The Company's Superstores offer a broad product
selection that includes 3,200 to 4,000 name-brand items (excluding music
software), depending on the selling square footage of the Superstore.
Professionally trained sales counselors, convenient credit options,
factory-authorized product repair, home delivery, installation centers for
automotive electronics, a toll-free product support line and a 30-day return
policy reflect the Company's strong commitment to customer service.
Customer Satisfaction. Extensive market research is conducted to measure
the Company's customer service record and to refine the Company's consumer
offer. More than 300,000 random telephone surveys are conducted each year to
track satisfaction among the Company's existing customer base. These surveys,
conducted from customer transaction records, measure satisfaction with all
points of customer interaction, including sales counselors, cashiers, the
warehouse staff, the Roadshop installers and home delivery and product service
representatives. Quick feedback allows the Company to immediately address
individual performance issues. Customer Service Index scores for each store
recognize strong overall performance and quickly pinpoint management issues that
require attention.
Training. The Company staffs its stores with commissioned sales
counselors, support personnel (cashiers and stockpersons), a store manager, one
or more sales managers and, in larger stores, an operations manager. New sales
counselors complete a minimum two-week training program focused on product
knowledge, customer service and store operations. Seven regional training
facilities are utilized for classroom sessions taught by more than 40
professional trainers, and a state-of-the-art video facility produces audio,
video and computer-based training materials. Formalized training for store,
sales and operations managers focuses on human resource management, sales
management and critical operating procedures. Individual development plans
address personal training needs, giving Associates advancement opportunity.
Consumer Credit. Because consumer electronics, personal computers and
major appliances represent relatively large purchases for the average consumer,
the Company's business is affected by consumer credit availability, which varies
with the state of the economy and the location of a particular store. In fiscal
1996, approximately 18 percent of the Company's total sales were made through
its private-label credit card and 44 percent through third-party credit sources.
Page 4 of 14
The Company established a subsidiary, First North American National Bank
(FNANB), in fiscal 1991 to handle its private-label credit card business. The
credit card bank subsidiary is located in Marietta, Ga. Interfacing FNANB with
the Company's point-of-sale (POS) system has produced a rapid customer credit
approval process. A customer's application can be electronically scored, and
qualified customers can generally receive approval in under one minute. In
addition to increased credit availability, the private-label credit card program
provides the Company with additional marketing opportunities, including direct
mail campaigns to credit card customers and special financing programs for
promotions. FNANB's credit extension, customer service and collection operations
are fully automated with state-ofthe-art technology to maintain the highest
possible level of customer service. This technology aids FNANB's aggressive
collection philosophy, which is comprised of early and frequent contact with
delinquent customers.
FNANB also manages a growing bankcard portfolio. Receivables generated by
both the private-label credit card and bankcard programs are sold to
non-affiliated entities under asset securitization programs.
In fiscal 1995, the Company partnered with American General Finance, Inc.
(AGF) to provide automated credit evaluation for customers who need an
installment credit option.
Systems. The Company's in-store POS system maintains an on-line record of
all transactions and allows performance to be tracked by region, store and
individual sales counselor. The information gathered by the system supports
automatic replenishment of in-store inventory from the regional distribution
centers and is incorporated into the Company's product buying decisions. The POS
system is interfaced with the credit approval systems of both FNANB and AGF. In
the stores, electronic signature capture for all credit card purchases, bar code
scanning for product returns and repairs, automatic price tag printing for price
changes and computerized home delivery scheduling all enhance the Company's
customer service, eliminating time-consuming administrative tasks for store
Associates and reducing costs through smoother store-level execution.
The Company's proprietary Customer Service Information System maintains an
on-line history of customer purchases and enables the Company to better assist
individuals with future purchases by ensuring that new products can be
integrated with existing products in the home. It also facilitates product
returns and product repair. In addition, this system supports our toll-free
product support line. The product support line provides the Company's customers
with access to skilled product specialists. From their homes, customers can
receive immediate answers to basic questions regarding product usage and
installation. This service is available only for products purchased at Circuit
City.
Distribution. At April 30, 1996, the Company operated nine automated
electronics distribution centers. These centers are designed to serve stores
within a 500-mile range. They utilize conveyor systems with laser bar code
scanners to reduce labor requirements, prevent inventory damage and maintain
inventory control. The Company also operates smaller distribution centers
handling primarily appliances and larger electronics products. The Company
believes that the use of the distribution centers enables it to efficiently
distribute a broad selection of merchandise to its stores, reduce inventory
requirements at individual stores, benefit from volume purchasing and maintain
accounting control. In addition, the Company operates an automated, centralized
distribution center for music software. Virtually all of the Company's
Superstore and electronics-only store merchandise is distributed through its
distribution centers.
Service. The Company offers service and repair for nearly all the products
it sells. Customers also are able to purchase extended warranty plans on most of
the merchandise the Company sells.
At April 30, 1996, the Company had 34 regional, factory-authorized repair
facilities. To meet customer needs, merchandise needing service or repair
usually is moved by truck from the stores to the Company's nearest regional
service facility and is returned to the customer at the store after repair. The
Company also has in-home technicians who service large items not conveniently
carried to a store.
Extended warranty plans extend coverage beyond the normal manufacturer's
warranty period, usually with terms of coverage (including the manufacturer's
warranty period) between 12 and 60 months. Late in fiscal 1994, the Company
began selling two new extended warranty programs on behalf of unrelated third
parties that issue these plans for merchandise sold by the Company and other
retailers. One of these programs is sold in most major markets and features
in-home service for personal computer products. The second program covers
consumer electronics and major appliances and was offered by approximately
two-thirds of the Company's Superstores at April 30, 1996. The Company sells its
own extended warranty contracts in markets where the third-party programs are
not available.
Page 5 of 14
Seasonality. Like other retail businesses, the Company's sales are greater
in the fourth quarter of the fiscal year than in other periods of the fiscal
year because of holiday buying patterns. A corresponding pre-seasonal inventory
build-up is associated with this sales volume. This increased sales volume
results in a lower ratio of fixed costs to sales and produces a higher ratio of
operating income to sales in the fourth fiscal quarter. The Company's sales for
the fourth fiscal quarter (which includes the Christmas season) were
$2,253,214,000 in fiscal 1996, $1,910,235,000 in fiscal 1995, and $1,406,736,000
in fiscal 1994 and represented approximately 32 percent of sales in fiscal 1996
and approximately 34 percent of sales in fiscal years 1995 and 1994.
CarMax. In 1993, the Company began to test CarMax: The Auto Superstore(R),
a retail concept selling used cars. In fiscal 1996, the Company announced the
national rollout of this concept.
CarMax's used cars are priced an average of $500 to $1,500 below the NADA
average book value. All customers receive the same low price with no negotiating
required. Competitive financing and extended warranty rates also are offered.
The CarMax selection includes foreign and domestic vehicles that are one to five
years old and have less than 70,000 miles. Mileage generally averages about
30,000. CarMax vehicles pass a quality inspection covering major mechanical and
electrical systems, power accessories and appearance. Vehicles are backed with a
five-day or 250- mile money-back guarantee and a 30-day comprehensive warranty
that covers all systems checked during inspection. In addition, the Company has
a franchise agreement that allows CarMax to sell new Chrysler, Plymouth, Jeep(R)
and Eagle products at its Norcross, Ga., location. This agreement will allow
CarMax to explore opportunities in new-car retailing.
CarMax utilizes AutoMation(R), a computerized inventory and point-of-sale
system. Using a touch screen, customers can electronically search the inventory
for cars that meet their feature requirements and price range. AutoMation(R)
displays a color picture of the car and generates a vehicle information sheet
for customer reference. After the selection process is complete, financing
applications and purchase and title forms are submitted electronically, reducing
customer wait time. In less than 10 minutes, qualified applicants can receive
approval and payment options from two sources - First North American Credit, a
division of the Company, and NationsBank. The inventory management system
includes bar codes on each vehicle and each on-site parking place. Daily
scanning tracks movement of vehicles on the lot. An electronic gate helps track
test drives for vehicles and sales consultants. This combination of systems
allows close monitoring and addressing of inventory and sales performance
issues.
Employees. On April 30, 1996, the Company had 22,852 hourly and salaried
employees and 13,578 sales employees working on a commission basis. Additional
personnel are employed during peak selling seasons. Management of the Company
considers its relationship with its employees to be good. None of the Company's
employees is subject to a collective bargaining agreement.
Information Regarding Forward-Looking Statements. The provisions of the
Private Securities Litigation Reform Act of 1995 (the "Act"), which became law
in late December 1995, provide companies with a "safe harbor" when making
forward-looking statements. This "safe harbor" encourages companies to provide
prospective information about their companies without fear of litigation. The
Company wishes to take advantage of the new "safe harbor" provisions of the Act
and is including this section in its Annual Report on Form 10-K in order to do
so. Company statements that are not historical facts, including statements about
management's expectations for fiscal year 1997 and beyond, are forward-looking
statements and involve various risks and uncertainties. Factors that could cause
the Company's actual results to differ materially from management's projections,
forecasts, estimates and expectations include, but are not limited to, the
following:
(a)changes in the amount and degree of promotional intensity exerted by
current competitors and potential new competition from both retail
stores and alternative methods or channels of distribution such as
electronic and telephone shopping services and mail order;
(b)changes in general U.S. economic conditions including, but not limited
to, consumer credit availability, interest rates, inflation, and
consumer sentiment about the economy in general;
(c)the presence or absence of new products or product features in the
merchandise categories the Company sells and changes in the Company's
actual merchandise sales mix;
(d)lack of availability/access to sources of supply for appropriate
Circuit City or CarMax inventory;
Page 6 of 14
(e)the ability to maintain an effective leadership team in a dynamic
environment or changes in the cost or availability of a suitable work
force to manage and support the Company's service-driven operating
strategy;
(f)changes in availability of capital expenditure and working capital
financing, including the availability of long-term financing to support
development of retail stores and distribution facilities and the
availability of securitization financing for credit card and auto
installment sales receivables;
(g)changes in production or distribution cost or cost of materials for the
Company's advertising;
(h)availability of appropriate real estate locations for expansion;
(i)the imposition of new restrictions or regulations regarding the sale
of products and or services the Company sells or changes in tax rules
and regulations applicable to the Company;
(j) adverse results in significant litigation matters;
(k)changes in levels of competition in the car business from either
traditional competitors and/or new competitors utilizing auto
superstore formats.
The United States retail industry and the specialty retail industry in
particular are dynamic by nature and have undergone significant changes over the
past several years. The Company's ability to anticipate and successfully respond
to continuing challenges is key to achieving its expectations.
Item 2. Properties.
At April 30, 1996, the Company's Circuit City retail operations were
conducted in 426 locations. The Company operates four Circuit City Superstore
formats with square footage and merchandise assortments tailored to population
and volume expectations for specific trade areas. The "D" format was developed
in fiscal 1995 to serve the most populous trade areas. Selling space in the "D"
format averages approximately 23,000 square feet with total square footage
averaging approximately 42,000. The "D" stores offer the largest merchandise
assortment of all the formats. The "C" format is designed to serve moderately
smaller trade areas and provides a highly competitive merchandise assortment.
New "C" stores typically have about 17,000 square feet of selling space; total
square footage for all "C" stores averages approximately 34,000. The "B" format
is often located in smaller markets or in trade areas that are on the fringes of
larger metropolitan markets. Selling space in these stores averages
approximately 11,000 square feet with an average total square footage of
approximately 25,000. The "B" stores offer a broad merchandise assortment that
maximizes return on investment in these lower volume areas. The "A" format
serves the least populated trade areas. Selling space in these stores averages
approximately 9,000 square feet, and total square footage averages approximately
18,000. The "A" stores feature a layout, staffing levels and merchandise
assortment that creates high productivity in the smallest markets.
The five electronics-only stores offer the Company's full line of consumer
electronics and a limited selection of major appliances. Selling space in these
stores averages approximately 4,000 square feet with an average total square
footage of approximately 8,000. The Company's 38 mall-based Circuit City Express
stores are located in regional malls, average approximately 2,000 to 3,000
square feet in size and sell small, gift-oriented items.
Page 7 of 14
The following table summarizes the Company's Circuit City stores as of
April 30, 1996:
Superstores Electronics- Mall
D C B A Only Stores Total
--- --- --- --- ---- ------ -----
Alabama - 5 - - - 1 6
Arizona 2 6 1 - - 1 10
Arkansas - 2 - - - - 2
California 7 56 9 2 - 1 75
Colorado 4 - - - - - 4
Connecticut 2 2 - - - - 4
Delaware - 1 - - - 1 2
District of Columbia - - - - - 1 1
Florida 3 23 7 - - 1 34
Georgia 2 9 3 - - 2 16
Illinois 6 18 4 - - 2 30
Indiana - 1 2 - - - 3
Kansas 1 - - - - - 1
Kentucky - 5 - - - - 5
Louisiana - 5 - - - - 5
Maryland 1 11 1 - 2 4 19
Massachusetts 1 7 3 - - 5 16
Michigan 5 - - - - - 5
Minnesota 1 7 - - - 3 11
Missouri 1 8 - - - 1 10
Nevada - 4 - - - - 4
New Hampshire - 4 - - - 1 5
New Jersey - 4 - - - - 4
New York 4 1 - - - 4 9
North Carolina 2 7 4 - - 2 15
Ohio 5 5 - - - 1 11
Oklahoma - 2 1 - - - 3
Oregon 2 3 - - - - 5
Pennsylvania - 7 1 1 - 2 11
Rhode Island - 1 - - - - 1
South Carolina 2 4 - - - 1 7
Tennessee 2 7 - - 1 - 10
Texas 3 27 4 5 - - 39
Utah 4 - - - - - 4
Virginia 1 12 5 4 - 4 26
Washington 3 3 1 - - - 7
West Virginia - - - - 2 - 2
Wisconsin 3 1 - - - - 4
--- --- --- --- --- --- ---
67 258 46 12 5 38 426
=== === === === === === ===
Of the stores open at April 30, 1996, the Company owns 25 stores and
leases the remaining 401 stores. The Company anticipates entering into
sale-leaseback transactions for 10 of the owned stores during fiscal 1997. Of
the remaining 15 owned stores, 10 have land leases and three are financed by
Industrial Development Revenue Bonds that are collateralized by the applicable
land, building and equipment.
For information with respect to obligations for leases, see note 7 of the
Notes to Consolidated Financial Statements on page 30 of the Company's 1996
Annual Report to Stockholders, which is incorporated herein by reference.
Page 8 of 14
The Company owns a 388,000-square-foot consumer electronics/appliance
distribution center in Doswell, Va., and a 387,000 square-foot consumer
electronics/appliance distribution center in Atlanta, Ga. These distribution
centers have been financed with Industrial Development Revenue Bonds.
The Company owns the land but leases the two buildings in which its
corporate headquarters is located. The Company leases space for all warehouse,
service and office facilities except for the aforementioned properties.
As of April 30, 1996, CarMax operated five Superstores, including two in
Georgia, two in North Carolina, and one in Virginia. All of these properties are
leased. In addition, CarMax owns a reconditioning facility in Florida that will
be sold in a sale-leaseback transaction during fiscal 1997.
Item 3. Legal Proceedings.
In the normal course of business, the Company is involved in various legal
proceedings. Based upon the Company's evaluation of the information presently
available, management believes that the ultimate resolution of any such
proceedings will not have a material adverse effect on the Company's financial
position, liquidity or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year ended February 29, 1996.
Executive Officers of the Company.
The following table identifies the present executive officers of the
Company. The Company is not aware of any family relationship between any
executive officers of the Company or any executive officer and any director of
the Company. All executive officers are generally elected annually and serve for
one year or until their successors are elected and qualify. The next general
election of officers will occur in June 1996.
Name Age Office
---- --- ------
Richard L. Sharp 49 Chairman of the Board,
President and Chief
Executive Officer
Richard S. Birnbaum 43 Executive Vice President
- Operations
W. Stephen Cannon 44 Senior Vice President and
General Counsel
Michael T. Chalifoux 49 Senior Vice President,
Chief Financial Officer and
Corporate Secretary
John A. Fitzsimmons 53 Senior Vice President
- Administration
W. Austin Ligon 45 Senior Vice President
- Automotive
W. Alan McCollough 46 Senior Vice President
- Merchandising
William E. Zierden 57 Senior Vice President
- Human Resources
Page 9 of 14
Mr. Sharp is a director and a member of the Company's executive committee.
He joined the Company in 1982 as executive vice president and was elected
president in 1984, chief executive officer in 1986, and chairman of the board in
1994.
Mr. Birnbaum joined the Company in 1972. He was elected vice president in
1985, Central Division president in 1986, senior vice president - marketing in
1991, and executive vice president - operations in 1994.
Mr. Cannon joined the Company in April 1994 as senior vice president and
general counsel. Prior to joining the Company, he had been since 1986 a partner
in Wunder, Diefenderfer, Ryan, Cannon & Thelen, a Washington, D.C., law firm.
Mr. Chalifoux is a director and a member of the Company's executive
committee. He joined the Company in 1983 as corporate controller and was elected
vice president and chief financial officer in 1988. He was elected senior vice
president in 1991 and became corporate secretary in 1993.
Mr. Fitzsimmons joined the Company in 1987 as senior vice president -
administration.
Mr. Ligon joined the Company in 1990 as vice president - corporate
planning and communications. He was elected senior vice president - corporate
planning and communications in 1991, senior vice president - corporate planning
and automotive in 1994, and senior vice president-automotive and CarMax
president in 1996.
Mr. McCollough joined the Company in 1987 as general manager of corporate
operations. He was elected assistant vice president in 1989, vice president and
Central Division president in 1991, and senior vice president merchandising in
1994.
Mr. Zierden joined the Company in 1984 as vice president - human
resources. He was elected senior vice president - human resources in 1989.
Part II
With the exception of the information incorporated by reference from the
1996 Annual Report to Stockholders in Item 2 of Part I and Items 5, 6, 7, and 8
of Part II and Item 14 of Part IV of this Form 10-K, the Company's 1996 Annual
Report to Stockholders is not to be deemed filed as a part of this Report.
Item 5. Market for the Company's Common Equity and Related Stockholder Matters.
Incorporated herein by reference is the information appearing under the
heading "Common Stock" on page 21 of the Company's 1996 Annual Report to
Stockholders.
As of May 3, 1996, there were 8,111 shareholders of record of the
Company's common stock.
Item 6. Selected Financial Data.
Incorporated herein by reference is the information appearing under the
heading "Reported Historical Information" on page 17 of the Company's 1996
Annual Report to Stockholders.
Item 7. Management's Discussion and Analysis of Results of Operations and
Financial Condition.
Incorporated herein by reference is the information appearing under the
heading "Management's Discussion and Analysis of Results of Operations and
Financial Condition" on pages 17 through 21 of the Company's 1996 Annual Report
to Stockholders, except for the information appearing on page 21 of such Annual
Report under the heading "Common Stock."
Page 10 of 14
Item 8. Financial Statements and Supplementary Data.
Incorporated herein by reference is the information appearing under the
headings "Consolidated Statements of Earnings," "Consolidated Balance Sheets,"
"Consolidated Statements of Cash Flows," "Consolidated Statements of
Stockholders' Equity," "Notes to Consolidated Financial Statements," and
"Independent Auditors' Report," on pages 22 through 33 of the Company's 1996
Annual Report to Stockholders. Incorporated herein by reference is the
information appearing under the heading "Note 12. Quarterly Financial Data
(Unaudited)" on page 32 of the Company's 1996 Annual Report to Stockholders.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
Part III
With the exception of the information incorporated by reference from the
Company's Proxy Statement in Items 10, 11, and 12 of Part III of this Form 10-K,
the Company's Proxy Statement dated May 10, 1996, is not to be deemed filed as a
part of this Report.
Item 10. Directors and Executive Officers of the Company.
The information concerning the Company's directors required by this Item
is incorporated by reference to the section entitled "Election of Directors"
appearing on pages 2 through 4 of the Company's Proxy Statement dated May 10,
1996.
The information concerning the Company's executive officers required by
this Item is incorporated by reference to the section in Part I hereof entitled
"Executive Officers of the Company" appearing on page 8.
The information concerning compliance with section 16(a) of the Securities
Exchange Act of 1934 required by this Item is incorporated by reference to the
section entitled "Section 16(a) Compliance" appearing on pages 14 and 15 of the
Company's Proxy Statement dated May 10, 1996.
Item 11. Executive Compensation.
The information required by this Item is incorporated by reference to the
sections entitled "Executive Compensation," "Employment Agreements and
Change-In-Control Arrangements," and "Compensation of Directors," appearing on
pages 7 through 9 and pages 13 and 14 of the Company's Proxy Statement dated May
10, 1996.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information required by this Item is incorporated by reference to the
section entitled "Beneficial Ownership of Securities" appearing on pages 5 and 6
of the Company's Proxy Statement dated May 10, 1996.
Item 13. Certain Relationships and Related Transactions.
None.
Page 11 of 14
Part IV
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K.
(a) The following documents are filed as part of this Report:
1. Financial Statements. The following Consolidated Financial
Statements of Circuit City Stores, Inc. and subsidiaries and the
related Independent Auditors' Report are incorporated by
reference to pages 22 through 33 of the Company's 1996 Annual
Report to Shareholders:
Consolidated Statements of Earnings for the fiscal years ended
February 29, 1996, and February 28, 1995 and 1994.
Consolidated Balance Sheets at February 29, 1996, and February
28, 1995.
Consolidated Statements of Cash Flows for the fiscal years ended
February 29, 1996, and February 28, 1995 and 1994.
Consolidated Statements of Stockholders' Equity for the fiscal
years ended February 29, 1996, and February 28, 1995 and 1994.
Notes to Consolidated Financial Statements.
Independent Auditors' Report.
2. Financial Statement Schedule. The following financial statement
schedule of Circuit City Stores, Inc. for the fiscal years ended
February 29, 1996, and February 28, 1995 and 1994 is filed as
part of this Report and should be read in conjunction with the
Consolidated Financial Statements of Circuit City Stores, Inc.:
II Valuation and Qualifying Accounts and
Reserves S-1
Independent Auditors' Report on Financial
Statement Schedule S-2
Schedules not listed above have been omitted because they are not
applicable or are not required or the information required to be
set forth therein is included in the Consolidated Financial
Statements or Notes thereto.
3. Exhibits. The Exhibits listed on the accompanying Index to
Exhibits immediately following the financial statement schedules
are filed as part of, or incorporated by reference into, this
Report.
(b) Reports on Form 8-K.
The Company did not file any reports on Form 8-K during the last
fiscal quarter covered by this Report.
Page 12 of 14
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CIRCUIT CITY STORES, INC.
(Registrant)
By s/ Richard L. Sharp
Richard L. Sharp
Chairman of the Board,
President and
Chief Executive Officer
By s/ Michael T. Chalifoux
Michael T. Chalifoux
Senior Vice President,
Chief Financial Officer and
Corporate Secretary
By s/ Keith D. Browning
Keith D. Browning
Vice President, Corporate Controller and
Chief Accounting Officer
May 20, 1996
Page 13 of 14
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated:
Signature Title Date
--------- ----- ----
Michael T. Chalifoux* Director May 20, 1996
Michael T. Chalifoux
Richard N. Cooper* Director May 20, 1996
Richard N. Cooper
Barbara S. Feigin* Director May 20, 1996
Barbara S. Feigin
Theodore D. Nierenberg* Director May 20, 1996
Theodore D. Nierenberg
Hugh G. Robinson* Director May 20, 1996
Hugh G. Robinson
Walter J. Salmon* Director May 20, 1996
Walter J. Salmon
Mikael Salovaara* Director May 20, 1996
Mikael Salovaara
s/ Richard L. Sharp, Director May 20, 1996
Richard L. Sharp
Edward Villanueva* Director May 20, 1996
Edward Villanueva
Alan L. Wurtzel* Director May 20, 1996
Alan L. Wurtzel
*By: s/ Richard L. Sharp,
Richard L. Sharp,
Attorney-In-Fact
The original powers of attorney authorizing Richard L. Sharp and Michael T.
Chalifoux, or either of them, to sign this annual report on behalf of certain
directors and officers of the Company are included as exhibit 24.
Page 14 of 14
Schedule II
CIRCUIT CITY STORES, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts and Reserves
(Amounts in thousands)
Balance at Charged Charge-offs Balance at
Beginning to less End of
Description of Year Income Recoveries Year
----------- ------- ------ ---------- ----
Reserves deducted from assets to which they apply:
Year ended February 28, 1994:
Allowance for doubtful accounts $5,249 $4,604 $(3,002) $ 6,851
====== ====== ======== ========
Year ended February 28, 1995:
Allowance for doubtful accounts $6,851 $1,292 $(1,406) $ 6,737
====== ====== ======== ========
Year ended February 29, 1996:
Allowance for doubtful accounts $6,737 $5,078 $(1,790) $ 10,025
====== ====== ======== ========
Independent Auditors' Report on Financial Statement Schedule
The Board of Directors
Circuit City Stores, Inc.:
Under date of April 3, 1996, we reported on the consolidated balance sheets of
Circuit City Stores, Inc. and subsidiaries (the Company) as of February 29, 1996
and February 28, 1995, and the related consolidated statements of earnings,
stockholders' equity and cash flows for each of the fiscal years in the
three-year period ended February 29, 1996, as contained in the February 29, 1996
annual report to stockholders. These consolidated financial statements and our
report thereon are incorporated by reference in the annual report on Form 10-K
for the year ended February 29, 1996. In connection with our audits of the
aforementioned consolidated financial statements, we also have audited the
related financial statement schedule as listed in Item 14(a)2 of this Form 10-K.
This financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on this financial
statement schedule based on our audits.
In our opinion, such schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
s/ KPMG Peat Marwick LLP
Richmond, Virginia
April 3, 1996
Circuit City Stores, Inc.
Annual Report on Form 10-K
INDEX TO EXHIBITS
(3) Articles of Incorporation and Bylaws
(a) Amended and Restated Articles of Incorporation of the Company,
effective January 26, 1990, filed as Exhibit 3(a) to the
Company's Annual Report on Form 10-K for the fiscal year ended
February 28, 1993, (File No. 1-5767) are expressly
incorporated herein by this reference.
(b) Articles of Amendment to the Amended and Restated Articles of
Incorporation of the Company effective February 26, 1993,
filed as Exhibit 3(b) to the Company's Annual Report on Form
10-K for the fiscal year ended February 28, 1993, (File No.
1-5767) are expressly incorporated herein by this reference.
(c) Bylaws of the Company, as amended and restated February 15,
1996, filed as Exhibit 4(b) to the Company's Current Report on
Form 8-K dated March 5, 1996, (File No. 1-5767) are expressly
incorporated herein by this reference.
(4) Instruments Defining the Rights of Security Holders, Including Indentures
(a) Amended and Restated Rights Agreement dated March 5, 1996,
between the Company and Norwest Bank Minnesota, N.A., as
Rights Agent, filed as Exhibit 4(a) to the Company's Current
Report on Form 8-K dated March 5, 1996, (File No. 1-5767) is
expressly incorporated herein by this reference.
(b) $100,000,000 Amended and Restated Credit Agreement dated June
30, 1995, between the Company; Signet Bank/Virginia; Crestar
Bank; NationsBank, N.A. and; Bank of America, N.T. & S.A.
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, in lieu of
filing a copy of such agreement, the Company agrees to furnish
a copy of such agreement to the Commission upon request.
(c) $100,000,000 term loan agreement dated July 28, 1994, between
the Company and the Long-Term Credit Bank of Japan, Limited,
as agent. Pursuant to Item 601(b)(4)(iii) of Regulation S-K,
in lieu of filing a copy of such agreement, the Company agrees
to furnish a copy of such agreement to the Commission upon
request.
(d) First Amendment to Term Loan Agreement dated October 24, 1995,
to the $100,000,000 term loan agreement dated July 28, 1994,
between the Company and the Long-Term Credit Bank of Japan,
Limited, as agent. Pursuant to Item 601(b)(4)(iii) of
Regulation S-K, in lieu of filing a copy of such agreement,
the Company agrees to furnish a copy of such agreement to the
Commission upon request.
(e) $175,000,000 term loan agreement dated May 26, 1995, between
the Company and LTCB Trust Company, as agent. Pursuant to Item
601(b)(4)(iii) of Regulation S-K, in lieu of filing a copy of
such agreement, the Company agrees to furnish a copy of such
agreement to the Commission upon request.
(f) First Amendment to Term Loan Agreement dated October 24, 1995,
to the $175,000,000 term loan agreement dated May 26, 1995,
between the Company and LTCB Trust Company as agent. Pursuant
to Item 601(b)(4)(iii) of Regulation S-K, in lieu of filing a
copy of such agreement, the Company agrees to furnish a copy
of such agreement to the Commission upon request.
(10) Material Contracts*
(a) Company's 1988 Stock Incentive Plan, filed as Exhibit 10(c) to
the Company's Annual Report on Form 10-K for the fiscal year
ended February 28, 1993, (File No. 1-5767) is expressly
incorporated herein by this reference.
(b) Amendments to the Company's 1988 Stock Incentive Plan filed as
Exhibit 10(k) to the Company's Annual Report on Form 10-K for
the fiscal year ended February 29, 1990, (File No. 1-5767) are
expressly incorporated herein by this reference.
(c) Amendment to the Company's 1988 Stock Incentive Plan filed as
Exhibit 4(h) to the Company's Registration Statement on Form
S-8 (Registration No. 33-50144) filed on July 28, 1992, is
expressly incorporated herein by this reference.
(d) Company's Amended and Restated 1989 Non-Employee Directors'
Stock Option Plan, filed as Exhibit A to the Company's
Definitive Proxy Statement dated May 12, 1995, for the Annual
Meeting of Stockholders held on June 13, 1995, is expressly
incorporated herein by this reference.
(e) Company's 1994 Stock Incentive Plan filed as Exhibit 99 to the
Company's Registration Statement on Form S-8 (Registration No.
033-56697) filed on December 1, 1994, is expressly
incorporated herein by this reference.
(f) Amendment adopted February 10, 1995, to the Company's 1994
Stock Incentive Plan filed as Exhibit 10(f) to the Company's
Annual Report on Form 10-K for the fiscal year ended February
28, 1995, (File No. 1-5767) is expressly incorporated herein
by this reference.
(g) Letter agreement and non-compete agreement dated January 30,
1996, (revised February 12, 1996), between the Company and
Alan L. Wurtzel is filed herewith.
(h) Employment agreement between the Company and Richard L. Sharp
dated October 17, 1986, and amendment dated August 1, 1989, to
the employment agreement, filed as Exhibit 10(m) to the
Company's Annual Report on Form 10-K for the fiscal year ended
February 28, 1993, (File No. 1-5767) is expressly incorporated
herein by this reference.
(i) Employment agreement dated June 1, 1988, between the Company
and John A. Fitzsimmons, filed as Exhibit 10(n) to the
Company's Annual Report on Form 10-K for the fiscal year ended
February 28, 1989, (File No. 1- 5767) is expressly
incorporated herein by this reference.
(j) Amendment dated August 1, 1989, to employment agreement dated
June 1, 1988, between the Company and John A. Fitzsimmons,
filed as Exhibit 10(o) to the Company's Annual Report on Form
10-K for the fiscal year ended February 28, 1993, (File No.
1-5767) is expressly incorporated herein by this reference.
(k) Employment agreement dated May 25, 1989, between the Company
and Michael T. Chalifoux, filed as Exhibit 10(x) to the
Company's Annual Report on Form 10-K for the fiscal year ended
February 28, 1991, (File No. 1- 5767) is expressly
incorporated herein by this reference.
(l) Employment agreement dated April 24, 1995, between the Company
and W. Alan McCollough is filed herewith.
(m) Amended and restated employment agreement dated May 12, 1995,
between the Company and Richard S. Birnbaum filed as Exhibit
10(s) to the Company's Annual Report on Form 10-K for the
fiscal year ended February 28, 1995, (File No. 1-5767) is
expressly incorporated herein by this reference.
(n) Company's Annual Performance-Based Bonus Plan filed as Exhibit
B to the Company's Definitive Proxy Statement dated May 13,
1994, for the Annual Meeting of Stockholders held on June 14,
1994, (File No. 1-5767) is expressly incorporated herein by
this reference.
(o) Program for deferral of director compensation implemented
October 1995 filed as Exhibit 10(i) to the Company's Quarterly
Report on Form 10-Q for the quarter ended November 30, 1995,
(File No. 1-5767) is expressly incorporated herein by this
reference.
(13) Annual Report to Stockholders
(21) Subsidiaries of the Company
(23) Consents of Experts and Counsel
Consent of KPMG Peat Marwick LLP to Incorporation by Reference of
Independent Auditors' Reports into the Company's Registration
Statements on Form S-8.
(24) Powers of Attorney
(27) Financial Data Schedule
* All contracts listed under Exhibit 10 are management contracts,
compensatory plans or arrangements of the Company required to be filed
as an exhibit.