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CIRCUIT CITY STORES, INC. 1999 Annual Report FINANCIAL HIGHLIGHTS

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CIRCUIT CITY STORES, INC. 1999 Annual Report FINANCIAL HIGHLIGHTS CIRCUIT CITY STORES, INC. 1999 Annual Report FINANCIAL HIGHLIGHTS Years Ended February 28 (Dollar amounts in thousands except per share data) 1999 1998 1997 CIRCUIT CITY STORES, INC. Net Sales and Operating Revenues ..................................................... $10,804,447 $8,870,797 $7,663,811 Net Earnings ..................................................................................... $ 142,924 $ 104,311 $ 136,414 Total Assets....................................................................................... $ 3,445,266 $3,231,701 $3,081,173 Total Stockholders’ Equity.................................................................. $ 1,905,130 $1,730,039 $1,614,856 Working Capital................................................................................ $ 1,430,710 $1,240,523 $1,326,482 CIRCUIT CITY GROUP Net Sales and Operating Revenues..................................................... $ 9,338,149 $7,996,591 $7,153,562 Earnings Before Inter-Group Interest in the CarMax Group.................................................................... $ 166,438 $ 138,534 $ 145,732 Net Earnings ..................................................................................... $ 148,381 $ 112,074 $ 136,680 Net Earnings Per Share: Basic ............................................................................................ $ 1.50 $ 1.14 $ 1.40 Diluted ........................................................................................ $ 1.48 $ 1.13 $ 1.39 Number of Circuit City Superstores ................................................... 537 500 443 CARMAX GROUP Net Sales and Operating Revenues..................................................... $ 1,466,298 $ 874,206 $ 510,249 Net Loss............................................................................................ $ 23,514 $ 34,223 $ 9,318 Net Loss Per Share............................................................................. $ 0.24 $ 0.35 $ 0.01 Number of CarMax Stores ................................................................. 30 18 7 See notes to consolidated and group financial statements. THE CIRCUIT CITY STORES, INC. IN THIS REPORT, WE USE THE COMMON STOCK SERIES INCLUDE: FOLLOWING TERMS AND DEFINITIONS: Circuit City Group Common Stock (NYSE:CC). Circuit City is a leading Circuit City Stores and Circuit City Stores, Inc. refer to the corpora- national retailer of brand-name consumer electronics, personal computers, tion, which includes the Circuit City retail stores and Circuit City-related major appliances and entertainment software. At the end of fiscal year 1999, the operations, the CarMax retail stores and related operations, and the company’s Circuit City business included 537 Superstores in more than 140 markets, interest in Digital Video Express. 48 Circuit City Express mall stores and two consumer electronics-only stores. Circuit City refers to the retail operations bearing the Circuit City name and The Circuit City Group also includes an investment in Digital Video Express to all related operations such as product service and First North American and a retained interest in the equity value of the CarMax Group. National Bank. CarMax Group Common Stock (NYSE:KMX). As the pioneer of the Circuit City Group refers to Circuit City and Circuit City-related opera- used-car superstore concept, CarMax is transforming auto retailing with a tions, the company’s interest in Digital Video Express and to the retained interest friendly offer that delivers low, “no-haggle” prices, a broad selection and high in the equity value of the CarMax Group. quality customer service. At the end of fiscal year 1999, CarMax operated 30 locations. CarMax Group and CarMax refer to retail locations bearing the CarMax name and to all related operations such as First North American Credit Corporation. FORWARD-LOOKING STATEMENTS: This report contains forward-looking statements, which are subject to risks and uncertainties, including, but not limited to, risks associated with the development of new business concepts. Additional discussion of factors that could cause actual results to differ materially from management’s projections, forecasts, estimates and expectations is contained in the company’s SEC filings, including the Circuit City Stores, Inc. “Management’s Discussion and Analysis” contained in this annual report. MOVING FORWARD WITH CONTINUED INNOVATION AND SUPERIOR CUSTOMER SERVICE Sam Wurtzel started a tradition in 1949 when he identified a new product– the television–and delivered it door-to-door. We extended the tradition when we developed the Circuit City Superstore, providing low prices and knowledgeable sales assistance. Through CarMax and Divx, we are bringing new consumer benefits to the automotive and home video industries as well. By delivering superior customer service– at Circuit City and in these new businesses–we believe that we can produce outstanding returns for stockholders. CIRCUIT CITY STORES, INC. 1999 ANNUAL REPORT 1 CHAIRMAN’S LETTER Fiscal 1999 was a significant year in the division. Mike joined us in 1988 as a manager trainee and became a progress of our businesses. Our Circuit store manager in 1989. He was named district manager in 1990 and City stores began to see an industry general manager in 1995. These promotions reflect the outstanding upturn driven by innovative digital video leadership these individuals bring to our organization. and audio technologies, increased house- FINANCIAL RESULTS hold penetration of wireless communica- Circuit City Stores, Inc. For the fiscal year ended February 28, 1999, tions products, continued strength in Circuit City Stores, Inc. total sales rose 22 percent to $10.80 billion personal computers and steady growth in from $8.87 billion in fiscal 1998; net earnings were $142.9 million major appliances. We are excited about our position in the industry as compared with $104.3 million. we look forward to the new technologies that should support growth Circuit City Group. For the Circuit City Group, total sales rose 17 well into the next decade. At CarMax, our used-car sales were chal- percent to $9.34 billion from $8.00 billion in fiscal year 1998, and com- lenged by a highly promotional new-car environment. Although our parable store sales increased 8 percent. Earnings for the Circuit City locations are producing industry-leading volumes and we met specific business increased 48 percent in fiscal 1999 to $235.0 million from operating improvement objectives, the overall business did not meet $159.2 million. Circuit City contributed $2.34 per share to the Circuit our sales or earnings expectations. In the coming year, we must build City Group’s earnings, an increase of 46 percent from $1.60 per share in from the consumer’s enthusiasm for the CarMax offer as we continue fiscal 1998. Including the impact from Divx and CarMax, net earnings refining our operations to improve financial performance. In the fall of for the Group were $148.4 million, or $1.48 per share, in fiscal 1999, 1998, Digital Video Express launched DVD players with the Divx fea- versus $112.1 million, or $1.13 per share, in fiscal 1998. ture and Divx movie discs nationwide. The Divx feature captured an CarMax Group. CarMax Group total sales rose 68 percent to $1.47 estimated 25 percent share of the DVD market during the holidays. billion from $874.2 million; comparable store sales decreased 2 per- Added brand selections and continued growth in title availability will cent; and the net loss was $23.5 million compared with $34.2 million make DVD players with the Divx feature an even more attractive in fiscal 1998. The fiscal 1998 net loss includes $7.0 million related to option for consumers in fiscal 2000. a write-down of assets. In fiscal 1999, the net loss attributed to the As always, our Associates rose to the year’s challenges. Each of CarMax Group stock was $5.5 million, or 24 cents per share, com- our businesses faces unique competitive issues, but I believe that our pared with $7.8 million, or 35 cents per share, in fiscal 1998. Associates are up to the task. I thank everyone for their efforts throughout the year. CIRCUIT CITY REVIEW I also am pleased to acknowledge three senior management pro- In fiscal 1999, the consumer electronics industry emerged from an motions made during the year. Our chief financial officer, Mike extended period when the majority of sales were generated by prod- Chalifoux, was named an executive vice president. Mike joined Circuit ucts well along in their life cycles. In the absence of significant prod- City as controller in 1983. He was elected vice president and CFO in uct introductions, numerous regional retailers, including many who 1988 and promoted to senior vice president in 1990. He was elected to had tried to copy our high-service offer, closed their doors. Today, our the board of directors in 1991 and added the title of corporate secre- principal competitors are large specialty, discount or warehouse tary in 1993. Gary Mierenfeld was named senior vice president of dis- retailers with generally lower levels of service. These are intense tribution and service. Gary joined us as vice president for distribution competitors. But, as we now look towards an upturn driven by more in 1993, bringing with him more than 23 years of retail experience. complex digital technologies, we are pleased that Circuit City is the Mike Froning was named president of Circuit City’s Southern division, only consumer electronics specialty retailer with a nationwide pres- succeeding Mario Ramirez, who became president
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