Circuit City 1997 Annual Report Download - page 27

Rent expense for the years ended December 31, 1997, 1996 and 1995 aggregated approximately $7,151,000, $7,406,000 and $5,235,000
respectively.
GUARANTEES - The Company has guaranteed a mortgage obtained by an affiliate ($2.3 million at December 31, 1997) relating to property
which the Company leases from the affiliate. Additionally the Company's U.K. subsidiaries have granted a security interest for substantially all
of their assets to secure a line of credit with a U.K. financial institution.
LITIGATION - The Company has been named as a defendant in lawsuits incidental to its businesses. Management of the Company, based on
discussions with legal counsel, believes the ultimate resolution of these lawsuits will not have a material effect on the Company's consolidated
financial position or results of operations.
At December 31, 1997 the Company was contingently liable under a standby letter of credit guaranteeing the obligations of a third party
supplier in the amount of $4 million. Such amount was paid on March 2, 1998. The Company has initiated legal action seeking a declaration
that the Company has a contractual right to offset the $4 million against amounts otherwise due to the supplier. The Company believes that the
ultimate outcome of this matter will not have a material adverse effect on the Company's consolidated financial statements.
CONTINGENCY - The Company is required to collect sales tax on certain of its out-of-state sales. In accordance with current law,
approximately 20% of the Company's 1997 domestic sales were subject to sales tax. A change in law could require the Company to collect
sales tax in additional states.
EMPLOYEE BENEFIT PLANS - Certain of the U.S. subsidiaries participate in defined contribution compensatory 401(k)/profit sharing
benefit plans covering such eligible employees as defined by the plan document. Contributions to the plan by the Company is determined as a
percentage of the employees' contributions. Aggregate expense to the Company for contributions to such plans was approximately $373,000,
$267,000 and $211,000 in the years ended December 31, 1997, 1996 and 1995, respectively.
Certain foreign entities require amounts to be accrued for each employee's retirement, determined in accordance with labor laws and labor
agreements in effect in the respective country. Liabilities relative to such termination indemnities were not material.
FOREIGN EXCHANGE RISK MANAGEMENT - The Company has limited involvement with derivative financial instruments and does not
use them for trading purposes. The Company enters into foreign currency options or forward exchange contracts to hedge certain foreign
currency transactions. The intent of this practice is to minimize the impact of foreign exchange rate movements on the Company's operating
results. 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.
FAIR VALUE OF FINANCIAL INSTRUMENTS - Financial instruments consist primarily of investments in cash, trade account receivables,
accounts payable and debt obligations. The Company estimates the fair value of financial instruments based on interest rates available to the
Company and by comparison to quoted market prices. At December 31, 1997 and 1996, the fair value of the Company's financial instruments
approximated their carrying values.
CONCENTRATION OF CREDIT RISK - Concentrations of credit risk with respect to trade account receivables are limited due to the large
number of customers comprising the Company's customer base. Ongoing credit evaluations of customer's financial condition are performed.
10. GEOGRAPHIC INFORMATION
The Company conducts its business in North America (the United States and Canada) and Europe. The following sets forth the Company's
operations in its two geographic markets (in thousands):
1999................................ 1,122 3,862 4,984
2000................................ 612 2,448 3,060
2001................................ 612 1,897 2,509
2002................................ 612 1,897 2,509
2003-2007........................... 2,958 9,062 12,020
2008-2012........................... - 3,935 3,935
Thereafter.......................... - 410 410
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$ 7,548 $ 27,674 $35,222
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YEAR ENDED DECEMBER 31, 1997 EUROPE NORTH AMERICA TOTAL
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Net sales.............................. $ 270,236 $ 875,152 $ 1,145,388
Income from operations................. 3,423 55,839 59,262
Identifiable assets.................... 82,548 317,197 399,745
YEAR ENDED DECEMBER 31, 1996 EUROPE NORTH AMERICA TOTAL
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