Circuit City 2010 Annual Report Download - page 16

The use of individually identifiable consumer data is regulated at the state, federal and international levels and we incur costs
associated with information security – such as increased investment in technology and the costs of compliance with consumer
protection laws. Additionally, our internet operations and website sales depends upon the secure transmission of confidential
information over public networks, including the use of cashless payments. While we have taken significant steps to protect customer
and confidential information, there can be no assurance that advances in computer capabilities, new discoveries in the field of
cryptography or other developments will prevent the compromise of our customer transaction processing capabilities and personal
data. If any such compromise of our security were to occur, it could have a material adverse effect on our reputation, operating
results and financial condition and could subject us to litigation.
Failure to adequately control fraudulent credit card transactions could increase our expenses. Increased sales to individual consumers,
which are more likely to be paid for using a credit card, increases our exposure to fraud. We employ technology solutions to help us
detect the fraudulent use of credit card information. However, if we are unable to detect or control credit card fraud, we may suffer
losses as a result of orders placed with fraudulent credit card data, which could adversely affect our business.
Changes in our income tax expense due to changes in the mix of U.S. and non-U.S. revenues and profitability, changes in tax rates or
exposure to additional income tax liabilities could affect our profitability. We are subject to income taxes in the United States and
various foreign jurisdictions. Our effective tax rate could be adversely affected by changes in the mix of earnings in countries with
differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in tax laws or by material audit
assessments. The carrying value of our deferred tax assets, which are primarily in the United States and the United Kingdom, is
dependent on our ability to generate future taxable income in those jurisdictions. In addition, the amount of income taxes we pay is
subject to ongoing audits in various jurisdictions and a material assessment by a tax authority could affect our profitability.
Our business depends largely on the efforts and abilities of certain key senior management. The loss of the services of one or more of
such key personnel could have a material adverse affect on our business and financial results. We do not maintain key man insurance
policies on any of our executive officers.
From time to time, we are involved in lawsuits or other legal proceedings arising in the ordinary course of our business. These may
relate to, for example, patent, trademark or other intellectual property matters, employment law matters, product liability, commercial
disputes, consumer sales practices or other matters. In addition, as a public company we could from time to time face claims relating
to corporate or securities law matters. The defense and/or outcome of such lawsuits or proceedings could have a material adverse
effect on our business.
Item 1B. Unresolved Staff Comments.
None.
Item 2. Properties.
We operate our business from numerous facilities in North America and Europe. These facilities include our headquarters location,
administrative offices, telephone call centers, distribution centers, computer assembly and retail stores. Certain facilities handle multiple
functions. Most of our facilities are leased; certain are owned by the Company.
North America
As of December 31, 2010 we have seven distribution centers in North America which aggregate approximately 1.7 million square feet, all of
which are leased. Our headquarters, administrative offices and call centers aggregate approximately 340,000 square feet, all of which are
leased. Our computer assembly facility is approximately 300,000 square feet and is owned by the Company.
The following table summarizes the geographic location of our North America stores at the end of 2010:
•
Failure to protect the integrity, security and use of our customers
’
information could expose us to litigation and materially damage
our standing with our customers
•
Sales to individual customers expose us to credit card fraud, which impacts our operations. If we fail to adequately protect ourselves
from credit card fraud, our operations could be adversely impacted.
•
Our profitability can be adversely affected by increases in our income tax exposure due to, among other things, changes in the mix of
U.S. and non-U.S. revenues and earnings, changes in tax rates or laws, changes in our effective tax rate due to changes in the mix of
earnings among different countries and changes in valuation of our deferred tax assets and liabilities.
• Our business is dependent on certain key personnel.
•
We are subject to litigation risk due to the nature of our business, which may have a material adverse effect on our results of
operations and business.
Location
Stores Open
–
12/31/09
Store Openings
Stores Open
–
12/31/10