Circuit City 2009 Annual Report Download - page 33

Table of Contents
was $45.0 million during 2008. We repaid approximately $3.9 million in short-term debt, repaid approximately $0.7 million in capital lease
obligations, paid a special dividend of $37.1 million, and repurchased Company stock of approximately $5.8 million. Proceeds and excess tax
benefits from stock option exercises provided approximately $2.5 million of cash. Net cash used in financing activities was $42.7 million during
2007, attributable to dividends paid of $36.6 million, repayment of short term debt of $8.7 million, repayment of $0.6 million in capital lease
obligations, repurchase of common stock of approximately $1.8 million, offset by proceeds of stock option exercises and related excess tax
benefits of $5.0 million.
We have a $120.0 million secured revolving credit agreement (which may be increased by up to an additional $30.0 million, subject to certain
conditions). The facility expires in October 2010 and the Company expects to renew the facility on or before that date. Borrowings under the
agreement are subject to borrowing base limitations of up to 85% of eligible accounts receivable and 40% of qualified inventories and are
secured by accounts receivable, inventories and certain other assets. The undrawn availability under the facility may not be less than $15.0
million until the last day of any month in which the availability net of outstanding borrowings is at least $70.0 million. The revolving credit
agreement requires that we maintain a minimum level of availability. If such availability is not maintained, we will then be required to maintain
a fixed charge coverage ratio (as defined). The agreement contains certain other covenants, including restrictions on capital expenditures and
payments of dividends. As of December 31, 2009, the Company was in compliance with all of the covenants under the credit facility. Eligible
collateral under the facility was $110.8 million, total availability was $98.7 million, outstanding letters of credit of were $12.1 million and there
were no outstanding advances.
The Company’s Inmac WStore subsidiary maintains a secured revolving credit agreement with a financial institution in France which is secured
by WStore Europe SA accounts receivable balances. Available amounts for borrowing under this facility includes all accounts receivable
balances not over 60 days past due reduced by the greater of €4.0 million or 10% of the eligible accounts receivable. As of December 31, 2009,
there was availability under this credit facility of approximately €6.0 million ($8.6 million) and there was €9.9 million ($14.2 million) of
outstanding borrowings. Outstanding balances under this agreement carry interest at 1.5% as of December 31, 2009. The credit facility duration
is indefinite; however either party may cancel the agreement with ninety days notice. Under this agreement the Company is subject to certain
non-financial covenants which it was in compliance with at December 31, 2009.
The Company’s WStore UK subsidiary maintains a £2 million secured resolving credit agreement with a financial institution in the United
Kingdom which is secured by WStore UK’
s accounts receivable balances. Available amounts for borrowing under this facility includes accounts
receivable balances less 30% retention. As of December 31, 2009, there was availability under this credit facility of approximately £.5 million
($.8 million). Outstanding balances under this agreement carry interest at 2.5% above the overnight daily LIBOR rate (0.5% at December 31,
2009). The credit facility duration is indefinite; however either party may cancel the agreement with ninety days notice. Under this agreement
the Company is subject to certain non-financial covenants which it was in compliance with at December 31, 2009.
The Company’s Netherlands subsidiary maintained a €5.0 million credit facility with a local financial institution. This facility expired in
November 2008 and was not renewed.
Our earnings and cash flows are seasonal in nature, with the fourth quarter of the fiscal year generating higher earnings and cash flows than the
other quarters. Levels of earnings and cash flows are dependent on factors such as consolidated gross margin and selling, general and
administrative costs as a percentage of sales, product mix and relative levels of domestic and foreign sales. Unusual expense items, such as one
time charges and settlements, may impact earnings and are separately disclosed. We expect that past performance may not be indicative of future
performance due to the competitive nature of our Technology Products segment where the need to adjust prices to gain or hold market share is
prevalent.
Macroeconomic conditions, such as business and consumer sentiment, may affect our revenues, cash flows or financial condition. However, we
do not believe that there is a direct correlation between any specific macroeconomic indicator and our revenues, cash flows or financial
condition. We are not currently interest rate sensitive, as we have significant cash balances and minimal debt.
We anticipate cash needs to support our growth and expansion plans, continued investment in upgrading and expanding our technological
capabilities and information technology infrastructure, opening of new retail stores, and in building out and expanding our distribution center
facilities and inventory systems.
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