Circuit City 2002 Annual Report Download - page 19

The Company is obligated under operating leases for the rental of certain facilities and equipment which expire
at various dates through 2013. The Company currently leases its New York facility from an entity owned by Richard
Leeds, Robert Leeds and Bruce Leeds, the Company's three principal shareholders and senior executive officers. The
annual rental totals $612,000 and the lease expires in 2007.
Following is a summary of the Company's contractual obligations for future principal payments on its debt,
minimum rental payments on its non-cancelable operating leases and minimum payments on its other commitments at
December 31, 2002 (in thousands):
After
2003 2004 2005 2006 2007 2007
---- ---- ---- ---- ---- ----
Contractual Obligations:
Maturities of long-term debt $1,250 $1,263 $1,250 $1,248 $1,261 $12,497
Payments on non-cancelable 5,948 5,583 5,569 5,278 4,569 8,454
operating leases
Purchase commitments 478 175 - - - -
------ ------ ------ ------ ------ -------
Total contractual obligations $7,676 $7,021 $6,819 $6,526 $5,830 $20,951
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Other Commitments:
Standby letters of credit $6,075 N/A N/A N/A N/A N/A
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The Company's operating results have generated cash flow which, together with borrowings under its debt
agreements, have provided sufficient capital resources to finance working capital and cash operating requirements, fund
capital expenditures, and fund the payment of interest on outstanding debt. The Company's primary ongoing cash
requirements will be to finance working capital, fund the payment of interest on indebtedness and fund capital
expenditures. The Company believes future cash flows from operations and availability of borrowings under its lines of
credit will be sufficient to fund the Company's ongoing cash requirements.
The Company is party to certain litigation, as disclosed in "Commitments and Contingencies" in the Notes to
Consolidated Financial Statements, the outcome of which the Company believes, based on discussions with legal
counsel, will not have a material adverse effect on its consolidated financial statements.
Off-Balance Sheet Arrangements
The Company has not created, and is not party to, any special-purpose or off-balance sheet entities for the
purpose of raising capital, incurring debt or operating the Company's business. The Company does not have any
arrangements or relationships with entities that are not consolidated into the financial statements that are reasonably
likely to materially affect the Company's liquidity or the availability of capital resources.
Critical Accounting Policies and Estimates
The Company's significant accounting policies are described in Note 1 to the consolidated financial statements.
The policies below have been identified as critical to the Company's business operations and understanding the results
of operations. Certain accounting policies require the application of significant judgment by management in selecting
the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an
inherent degree of uncertainty, and as a result, actual results could differ from those estimates. These judgments are
based on historical experience , observation of trends in the industry, information provided by customers and
information available from other outside sources, as appropriate. Management believes that full consideration has been
given to all relevant circumstances that the Company may be subject to, and the consolidated financial statements of
the Company accurately reflect management's best estimate of the consolidated results of operations, financial position
and cash flows of the Company for the years presented.
Revenue Recognition and Accounts Receivable
. The Company recognizes sales based on the terms of the customer