Circuit City 2002 Annual Report Download - page 5

During 2002 the Company entered into financing agreements secured by its distribution facility in Suwanee,
Georgia and its newly constructed European headquarters and sales facility in Wellingborough, England. The Georgia
loan is for $8.4 million and bears interest at 7.04%. It requires monthly principal and interest payments of $62,000
through May 2012, with a final additional principal payment of $6.4 million at maturity in May 2012. The
Wellingborough facility was financed by an 11½ year term loan agreement for £6.6 million (US $10.6 million at the
December 31, 2002 exchange rate), repayable in 40 quarterly installments of £165,000 ($266,000), which began in
November 2002. The outstanding borrowing bears interest at LIBOR plus 160 basis points.
Products
Systemax offers more than 40,000 brand name and private label products. The Company endeavors to expand
and keep current the breadth of its product offerings in order to fulfill the increasingly wide range of product needs of
its customers.
Computer sales include Systemax PCs complemented by offerings of other brand name PCs and notebook
computers. The Company's computer related products include supplies such as laser printer toner cartridges and ink jet
printer cartridges; media such as recordable disks and magnetic tape cartridges; peripherals such as hard disks, CD-
ROM and DVD drives, printers and scanners; memory upgrades; data communication and networking equipment;
ergonomic accessories such as adjustable monitor support arms and anti-glare screens; and packaged software.
The Company's industrial products include storage equipment such as metal shelving, bins and lockers, light
material handling equipment such as hand carts and hand trucks; furniture, small office machines and related supplies;
and consumable industrial products such as first aid items, safety items, protective clothing and OSHA compliance
items. The table below summarizes the Company's mix of sales by product category:
Product Type - Year Ended December 31(Percentage of net sales)
---------------------------------------------------------------
2002 2001 2000
---- ---- ----
Computer and Computer Related Products................. 90% 89% 88%
Industrial Products.................................... 10 11 12
-- -- --
Total.................................................. 100% 100% 100%
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Sales and Marketing
Systemax has established an integrated three-pronged system of direct marketing designed to maximize sales.
The Company's "relationship marketing" team services large and mid-sized business customers and educational
organizations and government agencies. Their efforts are supported by frequent catalog mailings and e-mail campaigns
in order to generate inbound telephone sales and the availability of interactive Company web sites, which allow
customers to purchase products directly over the internet. The Company believes that the integration of these three
marketing methods enables it to more thoroughly penetrate its customer base. Increased internet exposure can lead to
more internet sales and can also generate more inbound telephone sales; just as catalog mailings which feature the
Company's web sites can result in greater internet-related sales.
Relationship Marketing
The Company's relationship marketing program focuses on expanding penetration of large and mid-sized
businesses, educational organizations and government agencies by establishing a personal relationship between such
customers and a Systemax account manager. In the United States, Systemax also has the ability to provide such
customers with electronic data interchange ("EDI") ordering and customized billing services, customer savings reports
and stocking of specialty items specifically requested by customers. The goal of the relationship marketing sales force
is to increase the purchasing productivity of current customers and to actively solicit newly targeted prospects to
become customers. The Company has taken a number of initiatives to improve the productivity of its sales forces and
to more aggressively pursue business from both past customers and new prospects, including strengthening its training