Circuit City 1997 Annual Report Download - page 14

"Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations", and the Notes to Consolidated Financial
Statements describe certain factors, among others, that could contribute to or cause such differences. Other factors that could contribute to or
cause such differences include, but are not limited to, unanticipated developments in any one or more of the following areas: (i) the Company's
ability to manage rapid growth as a result of internal expansion and strategic acquisitions, (ii) the effect on the Company of volatility in the
price of paper and periodic increases in postage rates, (iii) the operation of the Company's management information systems including the costs
and effects associated with the year 2000 date change problem, (iv) the general risks attendant to the conduct of business in foreign countries,
including currency fluctuations associated with sales not denominated in United States dollars, (v) significant changes in the computer products
retail industry, especially relating to the distribution and sale of such products,
(vi) competition in the PC, notebook computer, computer related products, office products and industrial products markets from superstores,
direct response (mail order) distributors, mass merchants, value added resellers, the Internet and other retailers, (vii) the potential for expanded
imposition of state sales taxes, use taxes, or other taxes on direct marketing companies, (viii) the continuation of key vendor relationships
including the ability to continue to receive vendor supported advertising, (ix) timely availability of existing and new products, (x) risks due to
shifts in market demand and/or price erosion of owned inventory, (xi) borrowing costs, (xii) changes in taxes due to changes in the mix of U.S.
and non-U.S. revenue, (xiii)pending or threatened litigation and investigations and (xiv) the availability of key personnel, as well as other risk
factors which may be detailed from time to time in the Company's Securities and Exchange Commission filings.
Readers are cautioned not to place undue reliance on any forward looking statements contained herein, which speak only as of the date hereof.
The Company undertakes no obligation to publicly release the result of any revisions to these forward looking statements that may be made to
reflect events or circumstances after the date hereof or to reflect the occurrence of unexpected events.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
The Company is exposed to market risks, which include changes in U.S. and international interest rates as well as changes in currency
exchange rates as measured against the U.S. dollar and each other. Global attempts to reduce these risks by utilizing certain derivative financial
instruments.
The value of the U.S. dollar affects the Company's financial results. Changes in exchange rates may positively or negatively affect Global's
sales (as expressed in U.S. dollars), gross margins, operating expenses and retained earnings. The Company engages in hedging programs
aimed at limiting in part the impact of certain currency fluctuations. Using primarily forward exchange and foreign currency option contracts,
Global, from time to time, hedges certain of its assets that, when remeasured according to generally accepted accounting principles, may impact
the Statement of Consolidated Income. These hedging activities provide only limited protection against currency exchange risks. Factors that
could impact the effectiveness of the Company's hedging programs include accuracy of sales forecasts, volatility of the currency markets,
availability of hedging instruments and the credit-worthiness of the parties which have entered into such contracts with the Company. All
currency contracts that are entered into by Global are for the sole purpose of hedging an existing or anticipated currency exposure, not for
speculative or trading purposes. In spite of Global's hedging efforts to reduce the effect of changes in exchange rates against the U.S. dollar, the
Company sales or costs could still be adversely affected by changes in those exchange rates.
As of December 31,1997, the Company had outstanding forward exchange contracts in the amount of 1.0 million Pounds Sterling, 30.0 million
French Francs and 700.0 million Italian Lire.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by Item 8 of Part II is incorporated herein by reference to the Consolidated Financial Statements filed with this report;
see Item 14 of Part IV.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by Item 10 of Part III is hereby incorporated by reference from the Company's Proxy Statement for the 1998 Annual
Meeting of Stockholders (the "Proxy Statement").
ITEM 11. EXECUTIVE COMPENSATION.
The information required by Item 11 of Part III is hereby incorporated by reference from the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by Item 12 of Part III is hereby incorporated by reference from the Proxy Statement.