Circuit City 2008 Annual Report Download - page 32

Table of Contents
Our purchase and other obligations consist primarily of certain employment agreements and service agreements.
In addition to the contractual obligations noted above, we had $9.1 million of standby letters of credit outstanding as of December 2008.
Our operating results have generated cash flow which, together with borrowings under our debt agreements, has provided sufficient capital
resources to finance working capital and cash operating requirements, fund capital expenditures, and fund the payment of interest on outstanding
debt. Our primary ongoing cash requirements will be to finance working capital, fund the payment of principal and interest on indebtedness,
fund capital expenditures and fund small acquisitions. We believe future cash flows from operations and availability of borrowings under our
lines of credit will be sufficient to fund ongoing cash requirements for at least the next twelve months.
We are party to certain litigation, the outcome of which we believe, based on discussions with legal counsel, will not have a material adverse
effect on our consolidated financial statements.
Tax contingencies are related to uncertain tax positions taken on income tax returns that may result in additional tax, interest and penalties being
paid to taxing authorities.
Off-Balance Sheet Arrangements
We have not created, and are not party to, any special-purpose or off-balance sheet entities for the purpose of raising capital, incurring debt or
operating our business. We do not have any arrangements or relationships with entities that are not consolidated into the financial statements that
are reasonably likely to materially affect our liquidity or the availability of capital resources.
The Company currently leases its facility in Port Washington, NY from Addwin Realty Associates, an entity owned by Richard Leeds, Bruce
Leeds, and Robert Leeds, Directors of the Company and the Company’s three senior executive officers and principal stockholders.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to market risks, which include changes in U.S. and international interest rates as well as changes in currency exchange rates
(principally Pounds Sterling, Euros and Canadian Dollars) as measured against the U.S. Dollar and each other.
The translation of the financial statements of our operations located outside of the United States is impacted by movements in foreign currency
exchange rates. Changes in currency exchange rates as measured against the U.S. dollar may positively or negatively affect income statement,
balance sheet and cash flows as expressed in U.S. dollars. Sales would have fluctuated by approximately $112 million and pre tax income would
have fluctuated by approximately $2.3 million if average foreign exchange rates changed by 10% in 2008. We have limited involvement with
derivative financial instruments and do not use them for trading purposes. We may enter into foreign currency options or forward exchange
contracts aimed at limiting in part the impact of certain currency fluctuations, but as of December 2008 we had no outstanding forward exchange
contracts.
Our exposure to market risk for changes in interest rates relates primarily to our variable rate debt. Our variable rate debt consists of short-term
borrowings under our credit facilities. As of December 2008, there were no outstanding balances under our variable rate credit facility. A
hypothetical change in average interest rates of one percentage point is not expected to have a material effect on our financial position, results of
operations or cash flows over the next fiscal year.
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