Circuit City 2005 Annual Report Download - page 9

Timely introduction of new products or product features are critical elements to remaining competitive in the PC
market. Other competitive factors include product performance, quality and reliability, technical support and customer
service, marketing and distribution and price. Some of our competitors have stronger brand-recognition, broader
product lines and greater financial, marketing, manufacturing and technological resources than us. Additionally, our
results could also be adversely affected should we be unable to maintain our technological and marketing arrangements
with other companies, such as Microsoft®, Intel® and Advanced Micro Devices®.
The North American computer related products market is highly fragmented and characterized by multiple
channels of distribution including direct marketers, local and national retail computer stores, computer resellers, mass
merchants, computer and office supply “superstores” and internet-based resellers. In Europe, our major competitors are
regional or country-specific retail and direct-mail distribution companies and internet-based resellers.
With conditions in the market for computer related products remaining highly competitive, continued reductions
in retail prices may adversely affect our revenues and profits. Additionally, we rely in part upon the introduction of new
technologies and products by other manufacturers in order to sustain long-term sales growth and profitability. There is
no assurance that the rapid rate of such technological advances and product development will continue.
Industrial Products
The market for the sale of industrial products in North America is highly fragmented and is characterized by
multiple distribution channels such as retail outlets, small dealerships, direct mail distribution, internet-based resellers
and large warehouse stores. We also face competition from manufacturers’ own sales representatives, who sell
industrial equipment directly to customers, and from regional or local distributors. Many high volume purchasers,
however, utilize catalog distributors as their first source of product. In the industrial products market, customer
purchasing decisions are primarily based on price, product selection, product availability, level of service and
convenience. We believe that direct marketing via catalog, the internet and sales representatives is an effective and
convenient distribution method to reach mid-sized facilities that place many small orders and require a wide selection
of products. In addition, because the industrial products market is highly fragmented and generally less brand oriented,
it is well suited to private label products.
Employees
As of December 31, 2005, we employed a total of 2,850 employees, including 2,730 full-time and 121 part-time
employees, of whom 1,764 were in North America and 1,086 were in Europe.
Environmental Matters
Under various national, state and local environmental laws and regulations in North America and Europe, a
current or previous owner or operator (including the lessee) of real property may become liable for the costs of removal
or remediation of hazardous substances at such real property. Such laws and regulations often impose liability without
regard to fault. We lease most of our facilities. In connection with such leases, we could be held liable for the costs of
removal or remedial actions with respect to hazardous substances. Although we have not been notified of, and are not
otherwise aware of, any material environmental liability, claim or non-compliance, there can be no assurance that we
will not be required to incur remediation or other costs in connection with environmental matters in the future.
Financial Information About Foreign and Domestic Operations
We conduct our business in North America (the United States and Canada) and Europe. Approximately 37.5%
of our net sales for the year ended December 31, 2005 were made by subsidiaries located outside of the United States.
For information pertaining to our international operations, see Note 12, “Segment and Related Information,” to the
consolidated financial statements included in Item 15 of this Form 10-K. The following sets forth selected information
with respect to our operations in those two geographic markets (in thousands):
Europe
North America
Total
2005