Circuit City 2002 Annual Report Download - page 13

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, causing them to limit their spending, would likely adversely
affect the Company as well.
•
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.
• 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,
resulting in the Company's inability to maintain its gross margins in the future.
• 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.
• 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.
•
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.
• 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.
• The Company's inventory is subject to risk due to technological change and 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.
• The Company currently has operations located in nine countries outside the United States, and non-U.S.
sales accounted for 39% of the Company's revenue during 2002. 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.
• It is the policy of the Company to insure for certain property and casualty risks consisting primarily of
physical loss to property, business interruptions resulting from property losses, workers' compensation,
comprehensive general liability, and auto liability. Insurance coverage is obtained for catastrophic property
and casualty exposures as well as those risks required to be insured by law or contract. Although the
Company believes that its insurance coverage is reasonable, significant events such as acts of war and
terrorism, economic conditions, judicial decisions, legislation and large losses could materially affect the
Company's insurance obligations and future expense.