Filed by Circuit City Stores, Inc.
Pursuant to Rule 425 under the Securities Act of 1933
And deemed filed pursuant to Rule 14a-12
Of the Securities Exchange Act of 1934
Subject Company: Circuit City Stores, Inc.
Commission File No. 001-05767
CIRCUIT CITY STORES, INC. ANNOUNCES PLAN TO SPLIT OFF
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ITS CARMAX AUTO SUPERSTORE BUSINESS
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Richmond, Va., February 22, 2002 -- Circuit City Stores, Inc. (NYSE:CC,KMX)
today announced that its board of directors has authorized management to
initiate a process that would separate its CarMax auto superstore business from
the Circuit City consumer electronics business through a tax-free split-off in
which CarMax, Inc., presently a wholly owned subsidiary of Circuit City Stores,
Inc., would become a separate publicly traded company.
Circuit City has requested a ruling from the Internal Revenue Service that the
separation would be tax-free to Circuit City and to holders of Circuit City
Group and CarMax Group stock. In association with the proposed split-off, the
board has authorized the preparation and filing of an appropriate registration
statement with the Securities and Exchange Commission.
Circuit City Stores, Inc. currently has the following two series of common stock
outstanding: the CarMax Group stock, which is intended to track the performance
of the company's auto superstore business and the Circuit City Group stock,
which is intended to track the performance of the company's consumer electronics
stores and related operations and the retained interest in the auto superstore
business. The split-off plan calls for the company to redeem its CarMax Group
stock in exchange for shares of CarMax, Inc. stock. Simultaneously, shares of
CarMax, Inc. stock would be distributed as a tax-free dividend to the holders of
Circuit City Group stock in proportion to the retained interest in the auto
superstore business.
In the split-off, the holders of CarMax Group stock would receive one share of
CarMax, Inc. stock for each share of stock redeemed by the company. Management
presently anticipates that the holders of Circuit City Group stock would receive
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Circuit City Stores, Inc.
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a fraction of a share of CarMax, Inc. stock for each share of Circuit City Group
stock they hold. As of today's date, the company estimates that the fraction
would be approximately .316, based on the current number of shares of Circuit
City Group stock outstanding and the current number of shares of CarMax Group
stock reserved for the Circuit City Group. The exact fraction would be
determined on the record date for the distribution.
"CarMax has produced solid sales and earnings growth during the past two years
and is now able to support its growth, including the previously announced
restart of its national expansion program, with no assistance from Circuit
City," said W. Alan McCollough, president and chief executive officer of Circuit
City Stores, Inc. "This split-off would enable the investment community to
analyze each business on its own merits, creating a simpler investment decision
for the financial markets. The split-off also would permit management of the two
businesses to better focus on the operational and financing objectives of their
respective businesses without the constraints imposed by being affiliates within
the same corporate group."
The split-off is subject to final approval by the company's board of directors
and approval by the company's shareholders. Circuit City expects that the
split-off could be consummated by late summer.
In connection with the split-off, Circuit City and CarMax, Inc. intend to file a
registration statement containing a proxy statement/prospectus and other
materials with the Securities and Exchange Commission. Security holders are
urged to read these materials when they become available because they will
contain important information. Investors may obtain a free copy of these
materials when they become available as well as other materials filed with the
SEC concerning Circuit City and CarMax, Inc. at the SEC's Web site at
http://www.sec.gov. Holders of Circuit City Group and CarMax Group stock will
receive at an appropriate time a proxy statement and information on how to
obtain at no cost transaction-related documents from Circuit City. This release
does not constitute an offering of any securities.
With respect to the split-off, Circuit City and its officers and directors may
be deemed to be participants in the solicitation of proxies from the company's
shareholders. Information regarding Circuit City's officers and directors is
included in Circuit City's proxy statement for its 2001 annual meeting of
shareholders filed with the SEC on May 11, 2001. This document is available free
of charge at the SEC's Internet site or by directing a request to Circuit City
Stores, Inc. at 9950 Mayland Drive, Richmond, Virginia 23233, Attention:
Corporate Secretary. Carolyn Baldwin Byrd and Paula G. Rosput were elected to
the Circuit City board after the 2001 annual meeting, and therefore their
interests in Circuit City are not described in the proxy statement for that
meeting. Ms. Byrd beneficially owns 503 Circuit City Group shares and 60 CarMax
Group shares and holds options to acquire 4,393 Circuit City Group shares and
507 CarMax Group shares, and Ms. Rosput beneficially owns 342 Circuit City Group
shares and 60 CarMax Group shares and holds options to acquire 2,962 Circuit
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Circuit City Stores, Inc.
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City Group shares and 517 CarMax Group shares. None of these options is
exercisable within 60 days of the date of this release. Since the 2001 annual
meeting, Kim D. Maguire has been appointed executive vice president -
merchandising for the company. He holds 40,500 restricted Circuit City Group
shares and options to acquire 200,000 Circuit City Group shares. Mr. Maguire's
options are not exercisable within 60 days of the date of this release.
In a separate release this morning, Circuit City updated fourth quarter and
fiscal year 2002 sales and earnings expectations for the Circuit City Group and
announced fiscal 2003 remodel plans and sales and earnings expectations for the
Circuit City business.
Circuit City is a leading national retailer of brand-name consumer electronics,
personal computers and entertainment software. CarMax is the nation's leading
specialty retailer of used cars. With headquarters in Richmond, Va., Circuit
City Stores, Inc. operates 603 Circuit City Superstores and 20 mall-based
Circuit City Express stores, giving it more locations in more markets than any
other consumer electronics specialty retailer. The company operates 38 CarMax
retail units in 36 locations, including 33 used-car superstores. CarMax operates
18 new-car franchises, 15 of which are integrated or co-located with its
used-car superstores. For more information, access the company's Web sites at
http://www.CircuitCity.com and http://www.CarMax.com.
This release contains forward-looking statements, which are subject to risks and
uncertainties. Additional discussion of factors that could cause actual results
to differ materially from management's projections, forecasts, estimates and
expectations is contained in the Circuit City Stores, Inc. SEC filings. A number
of uncertainties, risks, conditions and other factors also could prevent the
implementation of the split-off described in this release.
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Contact: Ann Collier, Vice President of Financial and Public Relations, (804) 527-4058
Celeste Gunter, Director of Circuit City Investor Relations, (804) 418-8237
Dandy Barrett, Director of CarMax Investor Relations, (804) 935-4591