Circuit City 2001 Annual Report Download - page 11

economic downturn. The Company may experience a continued decline in sales as a result of the current economic conditions and the lack of
visibility relating to future orders. In response to economic conditions, the Company from time to time adjusts its cost structure to reduce
spending where appropriate. A failure by the Company to reduce costs in a timely manner could adversely affect the Company's future
operating results. In addition, notwithstanding such cost control measures, a continuing decline in the economy that adversely affects the
Company's customers would likely adversely affect the Company as well.
o The Company's consolidated results of operations depends upon, among other things, its ability to maintain and increase sales volumes with
existing customers; its ability to attract new customers and the financial condition of its customers. The Company cannot predict with any
certainty whether it will be able to maintain or improve upon historical sales volumes with existing customers, or whether it will be able to
attract new customers.
o The Company may not be able to compete effectively with current or future competitors. The market for the Company's products and services
is intensely competitive and subject to constant technological change. The Company expects this competition to further intensify in the future.
Some competitors are large companies with greater financial, marketing and product development resources than the Company's. In addition,
new competitors may enter the Company's key markets. This may place the Company at a disadvantage in responding to competitors' pricing
strategies, technological advances and other initiatives.
o In many cases the Company's products compete directly with those offered by other manufacturers and distributors. If any of the Company's
competitors were to develop products or services that are more cost-effective or technically superior, demand for the Company's product
offerings could decrease.
o The Company purchases certain materials and components for its products from various suppliers, some of which are located outside of the
U.S. Any loss of, or interruption of supply from key suppliers may require the Company to find new suppliers. This could result in production
or development delays while new suppliers are located, which could substantially impair operating results.
o The Company's PC products contain electronic components, subassemblies and software that in some cases are supplied through sole or
limited source third-party suppliers. Although the Company does not anticipate any problems procuring supplies in the near-term, there can
never be any assurance that parts and supplies will be available in a timely manner and at reasonable prices. If the availability of these or other
components used in the manufacture of our products was to decrease, or if the prices for these components was to increase significantly,
operating costs and expenses could be adversely affected.
o A significant portion of the Company's revenues are derived from the sale of products manufactured using licensed patents, software and/or
technology. Failure to renew these licenses on favorable terms or at all could force the Company to stop manufacturing and distributing these
products and the Company's financial condition could be adversely affected.
o The Company's inventory is subject to risk due to changes in market demand for particular products. The resulting excess and/or obsolete
inventory could have an adverse impact on the Company's results of operations.
o The Company currently has operations located in nine countries outside the United States, and non-U.S. sales accounted for 38% of the
Company's revenue during 2001. The Company's future results could be adversely affected by several factors, including changes in foreign
currency exchange rates, changes in a country's economic or political conditions, unexpected changes in regulatory requirements and natural
disasters.
o The Company's current domestic credit facility expires on June 15, 2004. If the Company is unable to renew or replace this credit facility, its
liquidity and capital resources may be adversely affected.
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 effect on the Company of volatility in the price of paper and periodic increases in postage rates, (ii) the operation
of the Company's management information systems, (iii) significant changes in the computer products retail industry, especially relating to the
distribution and sale of such products, (iv) the potential for expanded imposition of state sales taxes, use taxes, or other taxes on direct
marketing and e-commerce companies,
(v) timely availability of existing and new products, (vi) 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, (vii) risks associated with
delivery of merchandise to customers by utilizing common delivery services such as the United States Postal Service and UPS, including
possible strikes and contamination, (viii) borrowing costs, (ix) changes in taxes due to changes in the mix of U.S. and non-U.S. revenue, (x)
pending or threatened litigation and investigations and (xi) 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.
RESULTS OF OPERATIONS