Circuit City 2009 Annual Report Download - page 17

Table of Contents
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The failure to timely and satisfactorily process manufacturers’ and our own rebate programs could negatively impact our customer
satisfaction levels .
Similar to other companies in the technology products industry, we advertise manufacturers’ mail-in rebates on many products we
sell and, in some cases, offer our own rebates. These rebates are processed through third party vendors and in house. If these rebates
are not processed in a timely and satisfactory manner by either third party vendors or our in house operations, our reputation in the
marketplace could be negatively impacted. See Item 3, Legal Proceedings.
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We may be unable to reduce prices in reaction to competitive pressures, or implement cost reductions or new product line expansion
to address gross profit and operating margin pressures; failure to mitigate these pressures could adversely affect our operating
results and financial condition .
The computer and consumer electronics industry is highly price competitive and gross profit margins are narrow and variable. The
Company’s ability to further reduce prices in reaction to competitive pressure is limited. Additionally, gross margins and operating
margins are affected by changes in factors such as vendor pricing, vendor rebate and or price protection programs, product return
rights, and product mix. Pricing pressure continued to be prevalent in 2009 as a result of the significant decline in economic activity
in the markets we serve and we expect this to continue during this or any period of sustained economic decline. We may not be able
to mitigate these pricing pressures and resultant declines in sales and gross profit margin with cost reductions in other areas or
expansion into new product lines. If we are unable to proportionately mitigate these conditions our operating results and financial
condition may suffer.
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We depend on bank credit facilities to address our working capital and cash flow needs from time to time, and if we are unable to
renew or replace these facilities, or borrowing capacity were to be reduced our liquidity and capital resources may be adversely
affected.
We require significant levels of capital in our business to finance accounts receivable and inventory. We maintain credit facilities in
the United States and in Europe to finance increases in our working capital if available cash is insufficient. The amount of credit
available to us at any point in time may be adversely affected by the quality or value of the assets collateralizing these credit lines. In
addition, if we are unable to renew or replace these facilities at maturity our liquidity and capital resources may be adversely
affected. However, we currently have no reason to believe that we will not be able to renew or replace our facilities when they reach
maturity.
We would be exposed to liability, including substantial fines and penalties and, in extreme cases, loss of our ability to accept credit
cards, in the event our privacy and data security policies and procedures are inadequate to prevent security breaches of our
consumer personal information and credit card information records.
In processing our sales orders we often collect personal information and credit card information from our customers. The Company
has privacy and data security policies in place which are designed to prevent security breaches, however, if a third party or a rogue
employee or employees are able to bypass our network security or otherwise compromise our customers’ personal information or
credit card information, we could be subject to liability. This liability may include claims for identity theft, unauthorized purchases,
claims alleging misrepresentation
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