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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
For the fiscal year ended February 28, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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
------------------- -------------------
Circuit City Stores, Inc. - Circuit City Group Common Stock, Par Value $0.50 New York Stock Exchange
Circuit City Stores, Inc. - CarMax Group 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
Series F, 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
amendments to this Form 10-K [ ].
On May 2, 1997, the Company had outstanding 98,230,743 Circuit City
Group common shares and 21,860,000 CarMax Group common shares. 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 $3,818,720,134 for the Circuit City Group and $322,435,000 for
the CarMax Group based upon the closing price of these shares as reported by the
New York Stock Exchange on May 2, 1997.
Page 1 of 17
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 19 through 69 of the
Company's Annual Report to Shareholders for the fiscal year ended February 28,
1997 (Parts I, II and IV) and (2) "Item One - 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 9, 1997 Proxy Statement, furnished to
shareholders of the Company in connection with the 1997 Annual Meeting of such
shareholders (Part III).
TABLE OF CONTENTS
Item Page
----
PART I
1. Business 3
2. Properties 8
3. Legal Proceedings 10
4. Submission of Matters to a Vote of Security Holders 10
Executive Officers of the Company 11
PART II
5. Market for the Company's Common Equity and Related Stockholder Matters 13
6. Selected Financial Data 13
7. Management's Discussion and Analysis of Results of Operations and Financial Condition 13
8. Financial Statements and Supplementary Data 13
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 13
PART III
10. Directors and Executive Officers of the Company 14
11. Executive Compensation 14
12. Security Ownership of Certain Beneficial Owners and Management 14
13. Certain Relationships and Related Transactions 14
PART IV
14. Exhibits, Financial Statement Schedule and Reports on Form 8-K 14
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PART I
Item 1. Business.
Circuit City Stores, Inc. was incorporated under the laws of Virginia
in 1949. Its corporate headquarters is located at 9950 Mayland Drive, Richmond,
Va. Its retail operations consist of Circuit City Superstores, Circuit City
electronics-only stores and mall-based Circuit City Express stores. It has a
wholly owned credit card bank subsidiary, First North American National Bank,
that extends consumer credit. Certain of its subsidiaries operate CarMax Auto
Superstores, a used auto retail business that also sells new cars.
Changes in Capital Structure. On January 24, 1997, Circuit City Stores,
Inc. shareholders approved the creation of two common stock series. The
Company's existing common stock was subsequently redesignated as Circuit City
Stores, Inc.-Circuit City Group Common Stock. In an initial public offering,
which was completed February 7, 1997, the Company sold 21.86 million shares of
Circuit City Stores, Inc.-CarMax Group Common Stock.
The Circuit City Group Common Stock is intended to track separately the
performance of the Circuit City store-related operations, a retained interest in
the CarMax Group, and all other businesses in which the Company may be engaged
(other than those comprising the CarMax Group). The CarMax Group Common Stock is
intended to track separately the performance of the CarMax operations.
Notwithstanding the attribution of the Company's assets and liabilities
(including contingent liabilities) and stockholders' equity between the CarMax
Group and the Circuit City Group for the purposes of preparing their respective
financial statements, holders of CarMax Group Stock and holders of Circuit City
Group Stock are shareholders of the Company and subject to all of the risks
associated with an investment in the Company and all of its businesses, assets
and liabilities. Such attribution and the change in the equity structure of the
Company does not affect title to the assets or responsibility for the
liabilities of the Company or any of its subsidiaries. The results of operations
or financial condition of one Group could affect the results of operations or
financial condition of the other Group. Accordingly, financial information about
one Group should be read in conjunction with financial information about the
other Group, as well as consolidated information.
In this document, the following terms and definitions are used:
The Company refers to Circuit City Stores, Inc. and subsidiaries, which
includes Circuit City retail stores and related operations and the
CarMax retail stores and related operations.
Circuit City refers to the retail operations under the Circuit City
name and to all related operations such as product service and First
North American National Bank.
Circuit City Group refers to the Circuit City operations and to the
retained interest in the equity value of the CarMax Group.
CarMax Group and CarMax refer to the retail locations under the CarMax
name and to all related operations such as First North American Credit
Corporation.
Circuit City Group:
General. This section describes the business of the Circuit City Group
exclusive of its retained interest in the CarMax business which is discussed
separately below. Circuit City 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.
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Each Circuit City store location 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 regional warehouse distribution facilities.
Expansion. As of April 30, 1997, Circuit City operates 500 retail
locations throughout the United States. In fiscal 1998, Circuit City expects to
open approximately 60 Superstores, to replace 10 to 15 stores and to add Circuit
City Express stores. New-market entries will comprise 35 to 40 of the new
Superstores, including approximately 15 in the New York City market. Circuit
City'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 management believes that local markets have
individual characteristics which vary greatly by the advertising, merchandising
and pricing strategies of competitors, Circuit City has organized its marketing
function to focus on markets with similar competitive conditions. Circuit City'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.
Circuit City's merchandising strategy emphasizes a broad selection of
products, including the industry's newest technologies, and a wide range of
prices. Merchandise mix and displays are controlled centrally to help 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 corporate
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, Circuit
City advertises low prices and provides each customer with a low-price
guarantee. Circuit City 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 Circuit City's own sale price, within 30 days, Circuit City
will refund 110 percent of the difference to the customer.
Suppliers. During fiscal 1997, Circuit City's 10 largest suppliers
accounted for approximately 51 percent of merchandise purchased. Circuit City's
major suppliers include Sony, Thomson, Whirlpool, Packard Bell, Panasonic, NEC,
JVC, Hitachi, Hewlett Packard and GE Appliances. Brand-name advertised products
are sold by all of Circuit City's retail locations. Circuit City has no
significant long-term contracts for the purchase of merchandise.
In the past, Circuit City 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.
Advertising. Circuit City relies on considerable amounts of advertising
to stimulate Superstore and electronics only store sales. Advertising
expenditures were 4.8 percent of sales in fiscal 1997 and 4.7 percent of sales
in fiscal 1996 and 1995. Circuit City primarily uses print advertising,
including multi-page vehicles and run-of-press newspaper ads, for Superstore and
electronics-only store advertising. Circuit City 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. Television campaigns
include merchandise assortment, price and customer service messages. With a
presence in most major metropolitan markets, Circuit City has begun to take
advantage of national broadcast and print advertising opportunities.
Competition. The brand-name consumer electronics and major appliance
business is highly competitive. Circuit City'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, competition has shifted
to include more self-service retailers that often offer a more limited product
selection but at highly competitive prices.
Circuit City uses pricing, selection and service to differentiate
itself from the competition. As part of its competitive strategy, Circuit City
strives to maintain highly competitive prices and offers every customer the
low-price guarantee previously described. Circuit City 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 return policy of
30 days on most merchandise, excluding computer equipment, reflect a strong
commitment to customer service.
4 of 17
Customer Satisfaction. Extensive market research is conducted to
measure Circuit City's customer service record and to refine its consumer offer.
Approximately 350,000 random surveys are conducted each year to track
satisfaction among Circuit City's existing customer base. These surveys,
conducted from customer transaction records, measure satisfaction with all
points of customer interaction, including sales counselors, cashiers, warehouse
staff, Roadshop installers and home delivery and product service
representatives. Quick feedback allows management 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. Circuit City 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 employees advancement opportunity.
Consumer Credit. Because consumer electronics, personal computers and
major appliances represent relatively large purchases for the average consumer,
Circuit City'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 1997, approximately 15 percent of Circuit City's total sales were made
through its private-label credit card and 46 percent through third-party credit
sources.
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 Circuit City'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 Circuit City 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-of the-art technology to maintain a high level of
customer service. This technology aids FNANB's collection philosophy of
contacting the cardholder in his/her initial days of delinquency to resolve the
past due status.
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.
Systems. Circuit City's in-store POS system maintains an on-line record
of all transactions and allows management to track performance 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 product buying decisions. The POS system is
interfaced with the FNANB credit approval system. 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 Circuit City's customer
service, eliminating time-consuming administrative tasks for store personnel and
reducing costs through smoother store-level execution.
Circuit City's proprietary Customer Service Information System
maintains an on-line history of customer purchases and enables Circuit City 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 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, 1997, Circuit City operated nine automated
electronics distribution centers. These centers are designed to serve stores
within a 500-mile range. They utilize conveyor systems and laser bar-code
scanners to reduce labor requirements, prevent inventory damage and maintain
inventory control. Circuit City also operates smaller distribution centers
handling primarily appliances and larger electronics products. Management
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. Circuit City also operates an automated, centralized
distribution center for music software. Virtually all of Circuit City's
Superstore and electronics-only store merchandise is distributed through its
distribution centers.
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Service. Circuit City 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 Circuit City sells.
At April 30, 1997, Circuit City 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 nearest regional service
facility and is returned to the customer at the store after repair. Circuit City
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. Circuit City sells two
extended warranty programs on behalf of unrelated third parties that issue these
plans for merchandise sold by Circuit City 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 85 percent of Circuit City
Superstores at April 30, 1997. Circuit City sells its own extended warranty
contracts in markets where the third-party programs are not available.
Seasonality. Like many retail businesses, Circuit City'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. Circuit City's
sales for the fourth fiscal quarter (which includes the Christmas season) were
$2,282,625,000 in fiscal 1997, $2,180,506,000 in fiscal 1996 and $1,883,571,000
in fiscal 1995 and represented approximately 32 percent of sales in fiscal 1997
and 1996 and approximately 34 percent of sales in fiscal year 1995.
CarMax Group:
General. In 1993, the Company began to test CarMax The Auto
Superstore(R): a retail concept selling used cars. In fiscal 1997, the Company
announced the national rollout of this concept. CarMax is a leading retailer of
used cars and light trucks in the United States with seven stores located in the
Southeast and one vehicle reconditioning center in Orlando, Florida. CarMax
purchases, reconditions and sells used vehicles at each of its stores and sells
new vehicles at one of its Atlanta, Georgia locations under a franchise
agreement with Chrysler Corporation ("Chrysler"). CarMax has also entered into
an agreement, pending manufacturer approval, for a second Chrysler franchise at
an Atlanta location to be opened in fiscal 1998.
Expansion. CarMax has announced an aggressive rollout plan. Over the
next five years, it plans to reach a total of 80 to 90 locations, expand the
retail repair business and add new-vehicle franchises that will build volume and
further leverage the fixed costs of the used-car Superstores.
Merchandising. Each CarMax store features a broad selection of quality
used cars and light trucks with a wide range of prices appealing to a wide range
of potential customers. CarMax stores vary in inventory size from 400 to 1,000
vehicles depending on local market size and consumer demand. To appeal to the
vast array of consumer preferences and budgets, CarMax offers its used vehicles
under two programs - the CarMax program and the ValuMax program. CarMax vehicles
generally are one to five years old, with less than 60,000 miles, and most are
priced from $9,500 to $21,000. Through the ValuMax program, CarMax sells
high-quality used vehicles that generally are more than five years old and/or
have over 60,000 miles, with most priced in a range from $4,500 to $10,500. To
ensure that CarMax quality standards are maintained, vehicles under both
programs undergo a comprehensive, certified quality inspection by CarMax service
technicians. CarMax backs its commitment to quality with a five-day or 250-mile,
money-back guarantee, subject to vehicles being returned in substantially the
same condition, and a free, 30-day comprehensive warranty on each vehicle.
CarMax's used cars are priced at an average of $500 to $1,000 below the
NADA average book value. All customers receive the same low price with no
negotiating required. CarMax does not charge any processing, administration,
application or other "hidden" fees, other than those mandated by local and state
regulations. Competitive financing and extended warranty rates also are offered.
CarMax has replaced the traditional "trade-in" transaction with a process in
which trained CarMax buyers appraise any vehicle, usually in 30 minutes or less,
and provide the vehicle's owner with a written guaranteed cash offer that is
good for seven days or 300 miles. The appraisal process is available to
everyone, whether or not they are purchasing a vehicle from CarMax.
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Suppliers. CarMax acquires a significant proportion of its used-vehicle
inventory at its store locations. CarMax appraises and makes an offer to
purchase any properly documented vehicle from an individual. CarMax also
acquires a significant proportion of its used vehicles through auctions and, to
a lesser extent, directly from other sources, including wholesalers, franchised
and independent dealers and fleet owners, such as leasing companies and rental
companies. Based on consumer acceptance of the appraisal process at existing
CarMax stores and the experience and success of CarMax to date in acquiring
vehicles from auctions and other sources, management believes that its sources
of used vehicles will continue to be sufficient to meet current needs and to
support planned expansion.
Reconditioning. All vehicles are thoroughly inspected and
reconditioned. Most vehicles are reconditioned at each store facility. With a
significant portion of vehicles purchased at the store, in-store reconditioning
reduces transportation cost and helps quickly move vehicles onto the sales lot.
CarMax stores have 15 to 40 mechanical bays available for reconditioning. A
centralized 40-bay reconditioning facility in Orlando, Fla., supplements
in-store capacity and supports new store openings.
Advertising. CarMax is able to realize significant cost savings on
advertising by purchasing its advertising jointly with Circuit City, thus
leveraging Circuit City's media buying power. Television and radio ads are
designed to enhance consumer awareness of the CarMax name and key components of
the CarMax offer and are distinctly different from those placed by most auto
dealers. Newspaper ads promote CarMax's selection and price leadership,
targeting consumers with immediate purchase intentions. Advertising expenditures
were 2.3 percent of sales in fiscal 1997, 2.6 percent of sales in 1996, and 2.9
percent of sales in 1995.
Franchise. CarMax operates its new-car dealership in the Atlanta market
under a Sales and Service Agreement ("Franchise Agreement") with Chrysler. The
Franchise Agreement provides, among other things, that CarMax has the right and
obligation to sell specified models of new Chrysler-manufactured vehicles and
provide related parts and service solely at its Gwinnett location. The Franchise
Agreement imposes various requirements on CarMax and compliance with these
requirements is closely monitored by Chrysler. The Franchise Agreement may be
terminated by Chrysler on generally not less than 60 days written notice for
specified reasons.
Competition. Automotive retailing in the United States is highly
competitive with approximately 23,000 franchised dealers and an even greater
number of independent used-vehicle dealers. In the used-vehicle market, CarMax
competes with existing franchised and independent dealers, rental companies and
private parties. The used-vehicle market also has attracted attention recently
from a number of public companies. Many franchised new-car dealerships have also
increased their focus on the used-vehicle market. Part of CarMax's business
strategy is to position itself as a low-price, low-cost operator in the
industry.
In the new-vehicle market, CarMax competes with other franchised
dealers offering vehicles produced by the same or other manufacturers, auto
brokers and leasing companies. As is typical of such arrangements, CarMax's
existing franchise agreement with Chrysler does not guarantee exclusivity within
a specified territory. Aggressive discounting by manufacturers of new cars,
which typically occurs in the fall during the close-out of prior year models,
may result in lower retail sales prices and margins for used vehicles during
such discounting.
Customer Satisfaction. The elements of the CarMax offer are designed to
create a customer-friendly experience. The no-haggle pricing allows the sales
consultant to focus solely on the customer's needs. CarMax sales personnel play
a significant role in ensuring a customer-friendly sales process. All sales
consultants, including both full and part-time employees, are compensated solely
on a commission basis. The amount of the commission is a fixed dollar amount per
vehicle sold. The entire purchase process, including a test-drive and financing,
can be completed in less than one hour. Extensive market research is conducted
to measure CarMax's customer service record and to refine its consumer offer.
Training. At the completion of the fiscal 1998 store opening plan, the
17 location general managers are expected to average almost three years of
CarMax management experience and 10 years of prior management experience. The
location general manager and department managers for a new store are typically
hired at least one year prior to the scheduled store opening date. During that
time these managers participate in a rigorous training program at CarMax
headquarters and the existing stores that rotates them through most key
departments and operations of the business. Each store has 10 to 15 inventory
buyers. Each buyer undergoes an 18-to-24 month apprenticeship under the tutelage
of an experienced buyer and appraise thousands of cars before making their first
independent purchase. All sales consultants complete two weeks of initial
training.
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Consumer Credit. CarMax provides financing for its customers' vehicle
purchases through its financing unit, First North American Credit Corporation
("FNAC") and other third-party lenders. Sub-prime financing is provided by
third-party lenders with no financial recourse to CarMax. Sales consultants use
AutoMation(R) to electronically submit financing applications and receive
responses from multiple lenders, generally in less than eight minutes.
Systems. CarMax utilizes AutoMation(R), a unique, proprietary and
enterprise-wide inventory management 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. 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.
Service. Until fiscal 1997, CarMax only performed minor repair service
under the CarMax free 30-day comprehensive warranty on used vehicles. CarMax
began testing retail repair service in its Atlanta, Georgia locations and more
extensive warranty service on Chrysler vehicles at the new-car franchise in
fiscal 1997. In order to achieve greater future profitability, attract new
customers and further develop customer loyalty, retail repair service was
expanded to all retail locations commencing in fiscal 1998.
Optional primary or extended service policies are available on every
vehicle at low, fixed prices. CarMax's MaxCare(R) extended service policies
offer superior bumper-to-bumper protection for up to an additional 72 months or
100,000 miles.
Seasonality. The business of CarMax is seasonal, with each location
generally experiencing more of its net sales in the first half of the fiscal
year. CarMax anticipates that the seasonality of its business may vary from
region to region as its operations expand geographically.
Employees:
On April 30, 1997, the Company had 25,859 hourly and salaried employees
and 15,883 sales employees working on a commission basis. None of the Company's
employees is subject to a collective bargaining agreement. Additional personnel
are employed during peak selling seasons. The Circuit City Group accounted for
24,616 of the Company's hourly and salaried employees and 15,455 of the
Company's sales employees working on a commission basis. The CarMax Group
accounted for 1,243 of the Company's hourly and salaried employees and 428 of
the Company's sales employees working on a commission basis. Management of the
Company considers its relationship with its employees to be good.
Item 2. Properties.
At April 30, 1997, the Company's Circuit City retail operations were
conducted in 500 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. At the end of fiscal
1997, selling space in the "D" format averaged approximately 24,000 square feet
with total square footage averaging 43,360. The "D" stores offer the largest
merchandise assortment of all the formats. The "C" format constitutes the
largest percent of the store base. Selling square footage in this format has
been increased during the last several years, and new "C" stores in fiscal 1997
generally had between 17,000 and 20,000 square feet of selling space; total
square footage for all "C" stores averaged 34,220. The "B" format is often
located in smaller markets or in trade areas that are on the fringes of larger
metropolitan markets. At the end of fiscal 1997, selling space in these stores
averaged approximately 12,000 square feet with an average total square footage
25,318. 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 averaged
approximately 10,000 square feet at the end of fiscal 1997, and total square
footage averaged 18,507. The "A" stores feature a layout, staffing levels and
merchandise assortment that creates high productivity in the smallest markets.
The four 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 49 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.
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The Company's CarMax operations were conducted in seven locations. The
Company operates three different store formats which vary in acreage, vehicle
assortment and facility square footage depending on local market size and
consumer demands. A typical "C" store will have 24 to 28 acres with room to
display up to 1,000 used vehicles and showroom, reconditioning and service
facilities totaling about 92,000 square feet. The typical "B" format store will
cover 20 to 23 acres, have room to display up to 800 used vehicles and include
facilities with a total of approximately 74,000 square feet. The "A" format will
typically cover 15 to 19 acres, have room for up to 600 used vehicles and
include facilities that total about 57,000 square feet. All formats will include
additional display room for new cars, wherever possible.
The following table summarizes the Company's Circuit City and CarMax
stores as of April 30, 1997:
Circuit City Group CarMax Group
---------------------------------------------------------- ------------------------------
Superstores Electronics - Mall Superstores
------------------------ -----------------
D C B A Only Stores Total C B A Total
- - - - ---- ------ ----- ------------------- -----
Alabama - 5 - - - 1 6 - - - -
Arizona 2 6 1 - - 1 10 - - - -
Arkansas - 2 - - - - 2 - - - -
California 12 55 11 2 - 3 83 - - - -
Colorado 5 2 - 1 - - 8 - - - -
Connecticut 2 2 - - - - 4 - - - -
Delaware - 1 - - - 1 2 - - - -
District of Columbia - - - - - 1 1 - - - -
Florida 4 23 7 - - 1 35 - 2 - 2
Georgia 3 8 4 - - 4 19 1 - 1 2
Hawaii 1 - - - - - 1 - - - -
Illinois 6 19 4 - - 4 33 - - - -
Indiana - 3 2 - - - 5 - - - -
Kansas 1 3 - - - - 4 - - - -
Kentucky - 5 - - - - 5 - - - -
Louisiana - 5 - - - - 5 - - - -
Maine - - 1 - - - 1 - - - -
Massachusetts 1 8 3 - - 6 18 - - - -
Maryland 1 12 1 1 4 19 - - - -
Michigan 7 4 1 2 - 1 15 - - - -
Minnesota 1 7 1 - - 3 12 - - - -
Missouri 1 9 - - - 1 11 - - - -
Nebraska 1 1 - - - - 2 - - - -
Nevada 1 3 - - - - 4 - - - -
New Hampshire - 4 - - - 2 6 - - - -
New Jersey - 4 - - - - 4 - - - -
New Mexico 1 - - - - - 1 - - - -
New York 4 2 - 1 - 3 10 - - - -
North Carolina 5 6 4 1 - 2 18 - 1 1 2
Ohio 6 8 1 - - 2 17 - - - -
Oklahoma - 2 1 - - - 3 - - - -
Oregon 2 5 - - - - 7 - - - -
Pennsylvania 2 10 1 2 - 2 17 - - - -
Rhode Island - 1 - - - - 1 - - - -
South Carolina 2 4 1 - - 1 8 - - - -
Tennessee 2 7 1 - 1 - 11 - - - -
Texas 7 25 4 5 - 2 43 - - - -
Utah 5 - - - - - 5 - - - -
Virginia 2 13 5 4 - 4 28 - - 1 1
Washington 4 3 1 - - - 8 - - - -
West Virginia - - - - 2 - 2 - - - -
Wisconsin 4 2 - - - - 6 - - - -
---- ---- --- --- -- --- -- ----------------------------
95 279 55 18 4 49 500 1 3 3 7
== === == == = == === = = = =
9 of 17
Of the Circuit City stores open at April 30, 1997, the Company owns
four stores and leases the remaining 496 stores. Two of the four stores owned
are financed by Industrial Development Revenue Bonds that are collateralized by
the applicable land, building and equipment.
All of the CarMax properties are leased.
For information with respect to obligations for Circuit City leases,
see note 9 of the Notes to Circuit City Group Financial Statements on page 52 of
the Company's 1997 Annual Report to Stockholders, which is incorporated herein
by reference. For information with respect to obligations for CarMax leases, see
note 11 of the Notes to CarMax Group Financial Statements on page 68 of the
Company's 1997 Annual Report to Stockholders, which is incorporated herein by
reference.
The Company owns a 388,000-square-foot consumer electronics/appliance
distribution center in Doswell, Va.; a 387,000 square-foot consumer
electronics/appliance distribution center in Atlanta, Ga.; and an
electronic/appliance service center in Kansas City, Mo. These 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.
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.
(a) A special meeting of the Company's shareholders was held
on January 24, 1997.
(c) (i) At such special meeting, the shareholders of the Company
approved the amendment of the Amended and Restated
Articles of Incorporation (the "Articles") to provide for
the issuance of the Company's Common Stock in series by
action of the Board of Directors, of which 125,000,000
shares would initially be designated by the Board of
Directors as Circuit City Stores, Inc.--Circuit City
Group Common Stock (the "Circuit City Stock") and
125,000,000 would initially be designated as Circuit City
Stores, Inc.--CarMax Group Common Stock (the "CarMax
Stock"). The amendment of the Articles was approved by
the following vote:
=======================================================================================
Broker
For Against Abstain Non-Votes
======================================================================
Articles 73,217,506 438,975 229,977 8,485,918
=======================================================================================
(ii) At such special meeting, the shareholders of the Company
approved the amendment of the Articles to increase the
number of authorized shares of common stock to
350,000,000 shares from 250,000,000 shares. The amendment
of the Articles was approved by the following vote:
=======================================================================================
Broker
For Against Abstain Non-Votes
======================================================================
Articles 71,323,637 2,374,785 188,036 8,485,918
=======================================================================================
10 of 17
(iii)At such special meeting, the shareholders of the Company
approved the amendment of the Articles to conform certain
provisions thereof to the current provisions of the
Virginia Stock Corporation Act and to delete certain
provisions thereof that have expired. The amendment of
the Articles was approved by the following vote:
========================================================================================
Broker
For Against Abstain Non-Votes
=======================================================================
Articles
81,436,170 663,963 272,243 0
========================================================================================
(iv) At such special meeting, the shareholders of the Company
approved the amendments of the 1994 Stock Incentive Plan
(the "1994 Plan"). The amendments thereof (i) clarify
that future grants may be made with respect to either
Circuit City Stock or CarMax Stock, or both, (ii) reserve
5,700,000 shares of CarMax Stock for issuance pursuant to
awards made under the 1994 Plan and (iii) permit
conversion of options outstanding under an existing stock
option plan of one of the Company's subsidiaries into
options to acquire shares of CarMax Stock. The amendments
of the 1994 Plan were approved by the following vote:
========================================================================================
Broker
For Against Abstain Non-Votes
======================================================================
1994 Plan 70,829,647 2,577,867 478,944 8,458,918
========================================================================================
(v) At such annual meeting, the shareholders of the Company
approved amendments of the Annual Performance-Based Bonus
Plan (the "Bonus Plan") to modify the definition of
Performance Criteria under the Bonus Plan. The amendment
of the Bonus Plan was approved by the following vote:
========================================================================================
Broker
For Against Abstain Non-Votes
======================================================================
Bonus Plan 72,418,001 973,873 494,584 8,458,918
========================================================================================
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.
Name Age Office
---- --- ------
Richard L. Sharp 50 Chairman of the Board,
Chief Executive Officer
W. Alan McCollough 47 President and
Chief Operating Officer
Richard S. Birnbaum 44 Executive Vice President
Operations
Dennis J. Bowman 43 Senior Vice President and
Chief Information Officer
11 of 17
W. Stephen Cannon 45 Senior Vice President and
General Counsel
Michael T. Chalifoux 50 Senior Vice President,
Chief Financial Officer and
Corporate Secretary
John A. Fitzsimmons 54 Senior Vice President
Administration
W. Austin Ligon 46 Senior Vice President
Automotive
Jonathan T. M. Reckford 34 Senior Vice President
Corporate Planning and Communications
Jeffrey S. Wells 51 Senior Vice President
Human Resources
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. 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, senior vice president -
merchandising in 1994, and president and chief operating officer in 1997.
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. Bowman joined the Company in May 1996 as vice president and chief
information officer. He was elected senior vice president and chief information
officer in 1997. Prior to joining the Company, he had served as senior vice
president - information services for Rite Aid Corporation since 1993 and was
previously a consultant with McKinsey & Company since 1984.
Mr. Cannon joined the Company in April 1994 as senior vice president
and general counsel. Prior to joining the Company, he had been a partner in
Wunder, Diefenderfer, Ryan, Cannon & Thelen, a Washington, D.C., law firm since
1986.
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. Reckford joined the Company in 1995 as vice president - corporate
planning and communications. He was elected senior vice president - corporate
planning and communications in 1996. Prior to joining the Company, he was
director of business planning and development for Disney Design and Development
since 1991.
Mr. Wells joined the Company in 1996 as senior vice president - human
resources. Prior to joining the Company, he had served as a senior vice
president of Toys "R" Us, Inc. since 1992.
12 of 17
Part II
With the exception of the information incorporated by reference from
the 1997 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 1997
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 23 of the Company's 1997 Annual Report to
Stockholders.
As of May 2, 1997, there were 8,190 shareholders of record of the
Circuit City Group common stock and 144 shareholders of record of the CarMax
Group common stock.
Item 6. Selected Financial Data.
Incorporated herein by reference is the information appearing under the
heading "Reported Historical Information" on page 19 of the Company's 1997
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
headings "Circuit City Stores, Inc. Management's Discussion and Analysis of
Results of Operations and Financial Condition" on pages 19 through 22, "Circuit
City Group Management's Discussion and Analysis of Results of Operations and
Financial Condition" on pages 38 through 41, and "CarMax Group Management's
Discussion and Analysis of Results of Operations and Financial Condition" on
pages 55 through 57 of the Company's 1997 Annual Report to Stockholders.
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 24 through 37 of the Company's Annual
Report to Stockholders.
Incorporated herein by reference is the information appearing under the
headings "Circuit City Group Statements of Earnings," "Circuit City Group
Balance Sheets," "Circuit City Group Statements of Cash Flow," "Circuit City
Group Statements of Group Equity," "Notes to Circuit City Group Financial
Statements," and "Independent Auditors' Report," on pages 42 through 54 of the
Company's 1997 Annual Report to Stockholders.
Incorporated herein by reference is the information appearing under the
headings "CarMax Group Statements of Operations," "CarMax Group Balance Sheets,"
"CarMax Group Statements of Cash Flows," "CarMax Group Statements of Group
Equity (Deficit)," "Notes to CarMax Group Financial Statements," and
"Independent Auditors' Report," on pages 58 through 69 of the Company's 1997
Annual Report to Stockholders.
Incorporated herein by reference is the information appearing under the
heading "Quarterly Financial Data (Unaudited)" on pages 36, 54 and 69 of the
Company's 1997 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 9, 1997, is not to be deemed filed
as a part of this Report.
13 of 17
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 "Item One - Election
of Directors" appearing on pages 2 through 3 of the Company's Proxy Statement
dated May 9, 1997.
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 pages 11 and 12.
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 page
14 of the Company's Proxy Statement dated May 9, 1997.
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
9, 1997.
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 4
and 5 of the Company's Proxy Statement dated May 9, 1997.
.
Item 13. Certain Relationships and Related Transactions.
None.
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 Financial Statements of
Circuit City Stores, Inc., the Circuit City Group and the CarMax
Group, and the related Independent Auditors' Reports are
incorporated by reference to pages 24 through 37, 42 through 54,
and 58 through 69 of the Company's 1997 Annual Report to
Shareholders:
Consolidated Statements of Earnings for the fiscal years ended
February 28, 1997, February 29, 1996, and February 28, 1995.
Circuit City Group Statements of Earnings for the fiscal years
ended February 28, 1997, February 29, 1996, and February 28,
1995.
CarMax Group Statements of Operations for the fiscal years ended
February 28, 1997, February 29, 1996, and February 28, 1995.
Consolidated Balance Sheets at February 28, 1997, and February
29, 1996.
Circuit City Group Balance Sheets at February 28, 1997, and
February 29, 1996.
CarMax Group Balance Sheets at February 28, 1997, and February
29, 1996.
Consolidated Statements of Cash Flows for the fiscal years ended
February 28, 1997, February 29, 1996, and February 28, 1995.
Circuit City Group Statements of Cash Flows for the fiscal years
ended February 28, 1997, February 29, 1996, and February 28,
1995.
14 of 17
CarMax Statements of Cash Flows for the fiscal years ended
February 28, 1997, February 29, 1996, and February 28, 1995.
Consolidated Statements of Stockholders' Equity for the fiscal
years ended February 28, 1997, February 29, 1996, and February
28, 1995.
Circuit City Group Statements of Group Equity for the fiscal
years ended February 28, 1997, February 29, 1996, and February
28, 1995.
CarMax Group Statements of Group Equity (Deficit) for the fiscal
years ended February 28, 1997, February 29, 1996, and February
28, 1995.
Notes to Consolidated Financial Statements.
Notes to Circuit City Group Financial Statements.
Notes to CarMax Group Financial Statements.
Independent Auditors' Report, Circuit City Stores, Inc.
Independent Auditors' Report, Circuit City Group.
Independent Auditors' Report, CarMax Group.
2. Financial Statement Schedule. The following financial statement
schedules of Circuit City Stores, Inc., Circuit City Group and
CarMax Group for the fiscal years ended February 28, 1997,
February 29, 1996, and February 28, 1995, are filed as part of
this Report and should be read in conjunction with the Financial
Statements of Circuit City Stores, Inc., Circuit Group and CarMax
Group.
II Valuation and Qualifying Accounts and Reserves, Circuit City Stores, Inc. S-1
II Valuation and Qualifying Accounts and Reserves, Circuit City Group S-1
II Valuation and Qualifying Accounts and Reserves, CarMax Group S-1
Independent Auditors' Report on Circuit City Stores, Inc. Financial Statement Schedule S-2
Independent Auditors' Report on Circuit City Group Financial Statement Schedule S-2
Independent Auditors' Report on CarMax Group 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.
15 of 17
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 and
Chief Executive Officer
By s/ Michael T. Chalifoux
-----------------------------
Michael T. Chalifoux
Senior Vice President,
Chief Financial Officer and
Corporate Secretary
By s/ Philip J. Dunn
-----------------------------
Philip J. Dunn
Vice President, Treasurer,
Corporate Controller and
Chief Accounting Officer
May 27, 1997
16 of 17
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 27, 1997
- --------------------------
Michael T. Chalifoux
Richard N. Cooper* Director May 27, 1997
- --------------------------
Richard N. Cooper
Barbara S. Feigin* Director May 27, 1997
- --------------------------
Barbara S. Feigin
Theodore D. Nierenberg* Director May 27, 1997
- --------------------------
Theodore D. Nierenberg
Hugh G. Robinson* Director May 27, 1997
- --------------------------
Hugh G. Robinson
Walter J. Salmon* Director May 27, 1997
- --------------------------
Walter J. Salmon
Mikael Salovaara* Director May 27, 1997
- --------------------------
Mikael Salovaara
John W. Snow* Director May 27, 1997
- --------------------------
John W. Snow
s/ Richard L. Sharp Director May 27, 1997
- --------------------------
Richard L. Sharp
Edward Villanueva* Director May 27, 1997
- --------------------------
Edward Villanueva
Alan L. Wurtzel* Director May 27, 1997
- --------------------------
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.
17 of 17
S-1
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:
Consolidated:
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
======== ======= ========= ========
Year ended February 28, 1997:
Allowance for doubtful accounts $ 10,025 $ 8,773 $ (3,402) $ 15,396
======== ======= ========= ========
Circuit City Group:
Year ended February 28, 1995:
Allowance for doubtful accounts $ 6,756 $ 1,020 $ (1,345) $ 6,431
======== ======= ========= ========
Year ended February 29, 1996:
Allowance for doubtful accounts $ 6,431 $ 4,599 $ (1,450) $ 9,580
======== ======= ========= ========
Year ended February 28, 1997:
Allowance for doubtful accounts $ 9,580 $ 6,817 $ (2,863) $ 13,534
======== ======= ========= ========
CarMax Group:
Year ended February 28, 1995:
Allowance for doubtful accounts $ 95 $ 272 $ (61) $ 306
======== ======= ========= ========
Year ended February 29, 1996:
Allowance for doubtful accounts $ 306 $ 479 $ (340) $ 445
======== ======= ========= ========
Year ended February 28, 1997:
Allowance for doubtful accounts $ 445 $ 1,956 $ (539) $ 1,862
======== ======= ========= ========
S-2
Independent Auditors' Report on Financial Statement Schedule
The Board of Directors
Circuit City Stores, Inc.:
Under date of April 3, 1997, we reported on the consolidated balance sheets of
Circuit City Stores, Inc. and subsidiaries (the Company) as of February 28, 1997
and February 29, 1996, 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 28, 1997, as contained in the February 28, 1997
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 28, 1997. In connection with our audits of the
aforementioned consolidated financial statements, we also have audited the
related Circuit City Stores, Inc. 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, 1997
S-2
Independent Auditors' Report on Financial Statement Schedule
The Board of Directors
Circuit City Stores, Inc.:
Under date of April 3, 1997, we reported on the balance sheets of the Circuit
City Group as of February 28, 1997 and February 29, 1996, and the related
statements of earnings, group equity and cash flows for each of the fiscal years
in the three-year period ended February 28, 1997, as contained in the February
28, 1997 annual report to stockholders. Our report dated April 3, 1997 includes
a qualification related to the effects of not consolidating the CarMax Group
with the Circuit City Group as required by generally accepted accounting
principles. These financial statements and our report thereon are incorporated
by reference in the annual report on Form 10-K of Circuit City Stores, Inc. for
the year ended February 28, 1997. In connection with our audits of the
aforementioned financial statements, we also have audited the related Circuit
City Group financial statement schedule as listed in Item 14(a)2 of this Form
10-K. This financial statement schedule is the responsibility of Circuit City
Stores, Inc.'s management. Our responsibility is to express an opinion on this
financial statement schedule based on our audits.
In our opinion, except for the effects of not consolidating the CarMax Group
with the Circuit City Group as discussed in the preceding paragraph, such
schedule, when considered in relation to the basic 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, 1997
S-2
Independent Auditors' Report on Financial Statement Schedule
The Board of Directors
Circuit City Stores, Inc.:
Under date of April 3, 1997, we reported on the balance sheets of the CarMax
Group as of February 28, 1997 and February 29, 1996, and the related statements
of operations, group equity (deficit) and cash flows for each of the fiscal
years in the three-year period ended February 28, 1997, as contained in the
February 28, 1997 annual report to stockholders. These financial statements and
our report thereon are incorporated by reference in the annual report on Form
10-K of Circuit City Stores, Inc. for the year ended February 28, 1997. In
connection with our audits of the aforementioned financial statements, we also
have audited the related CarMax Group financial statement schedule as listed in
Item 14(a)2 of this Form 10-K. This financial statement schedule is the
responsibility of Circuit City Stores, Inc.'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
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, 1997
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 February 3, 1997, filed as Exhibit
4.1 to the Company's Registration Statement on Form
S-8 (Registration No. 333-22759), filed on March 4,
1997, are expressly incorporated herein by this
reference.
(b) Bylaws of the Company, as amended and restated June
18, 1996, filed as Exhibit 3(ii) to the Company's
Quarterly Report on Form 10-Q for the quarter ended
May 31, 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 February
3, 1997, between the Company and Norwest Bank
Minnesota, N.A., as Rights Agent, is filed herewith.
(b) $100,000,000 term loan agreement dated July 28, 1994,
between the Company, the Long-Term Credit Bank of
Japan, Limited, as agent, and the banks named
therein. 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) 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, the
Long-Term Credit Bank of Japan, Limited, as agent,
and the banks named therein. 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) Second Amendment to Term Loan Agreement dated August
21, 1996, to the $100,000,00 term loan agreement
dated July 28, 1994, between the Company, the
Long-Term Credit Bank of Japan, Limited, as agent,
and the banks named therein. 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, the LTCB Trust Company, as
agent, and the banks named therein. 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, the LTCB
Trust Company, as agent, and the banks named therein.
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.
(g) $130,000,000 term loan agreement dated June 14, 1996,
between the Company, the Royal Bank of Canada, as
agent, and the banks named therein. 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.
Page 1 of 3
(h) $150,000,000 Credit Agreement dated August 31, 1996,
between the Company, Crestar Bank, as agent, and the
banks named therein. 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) The 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 with the Commission on July 28, 1992, is
expressly incorporated herein by this reference.
(d) Amendment adopted February 20, 1997 to the Company's
1988 Stock Incentive Plan is filed herewith.
(e) The 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.
(f) Amendment adopted April 9, 1996, to the Company's
Amended and Restated 1989 Non-Employee Directors
Stock Option Plan filed as Exhibit 10(ii) to the
Company's Quarterly Report on Form 10-Q for the
quarter ended May 31, 1996 is expressly incorporated
herein by this reference.
(g) Amendment adopted February 20, 1997 to the Company's
Amended and Restated 1989 Non-Employee Directors
Stock Option Plan is filed herewith.
(h) The Company's 1994 Stock Incentive Plan, as amended
as of January 24, 1997, filed as Annex III to the
Company's Definitive Proxy Statement dated December
24, 1996, for a Special Meeting of Shareholders held
on January 24, 1997, (File No. 1-5767) is expressly
incorporated herein by this reference.
(i) Letter agreement and non-compete agreement dated
January 30, 1996, (revised February 12, 1996),
between the Company and Alan L. Wurtzel filed as
Exhibit 10(g) 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.
(j) 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.
(k) 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 hereby by this
reference.
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(l) 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.
(m) 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.
(n) Employment agreement dated April 24, 1995, between
the Company and W. Alan McCollough filed as Exhibit
10(l) 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.
(o) 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.
(p) The Company's Annual Performance-Based Bonus Plan, as
amended as of January 24, 1997, filed as Annex IV to
the Company's Definitive Proxy Statement dated
December 24, 1996, for a Special Meeting of
Shareholders held on January 24, 1997, (File No.
1-5767) is expressly incorporated herein by this
reference.
(q) 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, (Filed No. 1-5767)
is expressly incorporated 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.
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