SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 1, 1996
CIRCUIT CITY STORES, INC.
(Exact name of registrant as specified in its charter)
Virginia I-5767 54-0493875
(State or other (Commission (I.R.S. Employer
jurisdiction of incorporation) File Number) Identification No.)
9950 Mayland Drive
Richmond, Virginia 23233
(Address of principal (Zip Code)
executive offices)
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Item 5. Other Events.
Circuit City Stores, Inc. today announced that the company's board of
directors has approved, subject to a favorable vote of shareholders, a plan to
create two series of common stock intended to track the separate performance of
its Circuit City and CarMax retail businesses. A preliminary proxy statement has
been filed with the Securities and Exchange Commission in connection with a
special meeting of shareholders expected to be held in late January or early
February for the purpose of seeking shareholder approval of the plan. A copy of
the related news release is attached as an exhibit hereto and incorporated by
reference.
Item 7. Financial Statements and Exhibits.
(c) Exhibits
99. News release dated November 1, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CIRCUIT CITY STORES, INC.
Dated: November 1, 1996 By: Michael T. Chalifoux
--------------------
Michael T. Chalifoux
Senior Vice President,
Chief Financial Officer
and Secretary
EXHIBIT 99
CIRCUIT CITY STORES, INC, PLANS TO CREATE
CARMAX GROUP COMMON STOCK
Richmond, Va., November 1, 1997 -- Circuit City Stores, Inc. (NYSE:CC) today
announced that the company's board of directors has approved, subject to a
favorable vote of shareholders, a plan to create two series of common stock
intended to track the separate performance of its Circuit City and CarMax retail
businesses.
The plan would create two "tracking" stocks in Circuit City Stores, Inc. One
stock will track the performance of the used- and new-car retail business, which
will be designated as the CarMax Group. The existing Circuit City common stock
will be redesignated as shares that will reflect the performance of the Circuit
City Group, which will include the Circuit City Superstore business as well as
its retained interest in the CarMax Group. The plan includes a public offering
of CarMax Group stock that will represent 15 percent to 20 percent of the equity
value of the Group. Upon completion of the offering, the Circuit City Group
would hold the balance of the equity value of the CarMax Group. The company
intends to continue paying the quarterly cash dividend, which is currently 3.5
cents, on the Circuit City Group shares. It does not expect to pay a dividend on
the CarMax Group shares for the foreseeable future.
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"Circuit City has a long history of building shareholder value," said Richard L.
Sharp, Circuit City's chairman and chief executive officer. "Today, we are the
nation's leading retailer of brand-name consumer electronics and major
appliances and the only full-service specialty retailer among the nation's top
10 consumer electronics retailers. We have successfully grown the Superstore
business to more than 400 locations in more than 100 markets and, over the last
10 years, achieved compound annual growth rates of 26 percent in sales and 27
percent in earnings. We expect to continue Circuit City's growth, reaching a
total of approximately 800 Superstores by the end of the decade.
"Five years ago, we began developing a revolutionary concept in used-car
retailing as an avenue for maintaining Circuit City's growth in the next
decade," Sharp said. "We have applied to CarMax many of the same marketing and
operating principals that have engendered success for Circuit City.
"CarMax has benefited from Circuit City's favorable access to financing,
including sale-leasebacks and asset-backed securitizations," Sharp said. "The
CarMax group also utilizes Circuit City's resources and expertise in such areas
as consumer credit; media buying; real estate acquisition and development; human
resource hiring, training and management; and management information systems.
-more-
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"We believe the structure of this plan will enable CarMax to maintain the
competitive advantages made possible through its relationship with Circuit City,
while also allowing shareholders to more fully capture the value of both
businesses," Sharp said. "Although changes in automotive retailing have
generated significant interest from the investment community, Circuit City's
board of directors believes the price range of Circuit City's existing stock has
not adequately reflected the value associated with our new concept."
Based on the initial success of the five existing CarMax locations and the
expansion of one facility to include a new-car franchise, the company announced
plans in June for a national roll out. CarMax expects to operate 80 to 90 CarMax
locations by early in the next decade. The proposed public offering will help to
satisfy the capital requirements of these expansion plans.
In summary, the company believes the tracking stock structure will enable it to
achieve the following important objectives:
Maximize Shareholder Value: By creating a separately traded stock that reflects
the results of the CarMax Group, this structure should encourage more in-depth
coverage and enable investors to better understand and value the business. The
market price established for the CarMax Group stock also will facilitate the
valuation of the interest that the Circuit
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City Group will continue to hold, and therefore, management believes that this
transaction will be a net positive for Circuit City shareholders. Because CarMax
produced a loss, as anticipated, in its initial start-up phase and is expected
to continue producing a net loss through at least the current fiscal year, the
creation of two series of stock will increase earnings per share for the Circuit
City Group stock on a historical and short-term basis.
Continue to Realize Synergies: This structure preserves the financial,
management, operational and tax benefits of remaining a single corporation.
Raise Capital to Finance Growth: The company expects to use proceeds from the
offering to finance part of the expansion plans for CarMax and to repay the
CarMax Group's allocated portion of the company's indebtedness.
Maintain Flexibility: The tracking stock structure will allow the company to
maintain flexibility that would not be available if the two groups were separate
legal entities.
The company is filing a preliminary proxy statement with the U.S. Securities and
Exchange Commission this morning. A final proxy statement is expected to be sent
to shareholders during December. Shareholders will be asked to approve the plan
at a special meeting in late January or early February. Solicitation of holders
of Circuit City's common stock will
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be made only after the final proxy statement has been filed. The company intends
to file a registration statement for the public offering of CarMax Group stock
in the near future. The public offering will be made only by means of the
prospectus included in the registration statement. The plan will not affect
title to the assets or responsibility for the liabilities of Circuit City
Stores, Inc. or any of its subsidiaries, nor will it affect the existing rights
of the holders of Circuit City Stores, Inc.'s debt.
Circuit City Stores, Inc. is the nation's largest retailer of brand-name
consumer electronics and major appliances and a leading retailer of personal
computers and music software. With headquarters in Richmond, Va., it operates
409 Superstores, five consumer electronics-only stores and 43 mall-based Circuit
City Express Stores.
CarMax is the automotive retail concept developed by Circuit City Stores, Inc.
CarMax operates five locations, including single locations in Richmond, Va.; and
Raleigh and Charlotte, N.C.; and two locations in Atlanta, Ga.
This release contains forward-looking statements, which are subject to risks and
uncertainties, including, but not limited to, risks associated with the
development of a new retail concept. 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.
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