Circuit City 1999 Annual Report Download - page 14

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 and e-commerce 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 involved with e- commerce, including possible loss of business and customer dissatisfaction
if outages or other computer- related problems should preclude customer access to the Company's web sites, (xi) risks associated with delivery
of merchandise to customers by utilizing common delivery services such as UPS, including possible strikes,
(xii) risks due to shifts in market demand and/or price erosion of owned inventory, (xiii) borrowing costs, (xiv) changes in taxes due to changes
in the mix of U.S. and non-U.S. revenue, (xv) pending or threatened litigation and investigations and (xvi) 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 this report, which speak only as of the date of
this report. 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. Systemax 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 Systemax's
sales (as expressed in U.S. dollars), gross margins, operating expenses and retained earnings. The Company may engage in hedging programs
aimed at limiting in part the impact of certain currency fluctuations. Using primarily forward exchange and foreign currency option contracts,
Systemax, 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 Systemax are for the sole purpose of hedging an existing or anticipated currency exposure, not
for speculative or trading purposes. In spite of Systemax's hedging efforts to reduce the effect of changes in exchange rates against the U.S.
dollar, the Company's sales or costs could still be adversely affected by changes in those exchange rates.
As of December 31,1999, the Company had no outstanding forward exchange contracts.
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 2000 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.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by Item 13 of Part III is hereby incorporated by reference from the Proxy Statement.
PART IV