Circuit City 2011 Annual Report Download - page 30

These expenses and capital expenditures will require significant levels of liquidity, which we believe can be adequately funded from our currently
available cash resources. In 2012 we anticipate capital expenditures of approximately $20 million although at this time we are not contractually
committed to incur these expenditures. Over the past several years we have engaged in opportunistic acquisitions, choosing to pay the purchase price
in cash, and may do so in the future as favorable situations arise. However, a deep and prolonged period of reduced consumer and/ or business to
business spending could adversely impact our cash resources and force us to either forego future acquisition opportunities or to pay the purchase price
in shares of our common stock, which could have a dilutive effect on our earnings per share. In addition we anticipate cash needs for implementation
of the financial systems. We believe that our cash balances, future cash flows from operations and our availability under credit facilities will be
sufficient to fund our working capital and other cash requirements for at least the next twelve months.
We maintain our cash and cash equivalents primarily in money market funds or their equivalent. As of December 31, 2011, all of our investments had
maturities of less than three months. Accordingly, we do not believe that our investments have significant exposure to interest rate risk.
We are obligated under non-cancelable operating leases for the rental of most of our facilities and certain of our equipment which expire at various
dates through 2030. We have sublease agreements for unused space we lease in Uniondale, New York. In the event the sub lessee is unable to fulfill its
obligations, we would be responsible for rents due under the leases.
Following is a summary of our contractual obligations for future principal payments on our debt, minimum rental payments on our non-cancelable
operating leases and minimum payments on our other purchase obligations as of December 31, 2011 (in thousands):
Our purchase and other obligations consist primarily of certain employment agreements and service agreements.
In addition to the contractual obligations noted above, we had $6.4 million of standby letters of credit outstanding as of December 31, 2011.
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. As of December 31, 2011, the Company had no uncertain tax positions.
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, senior executives, Directors and controlling shareholders of the Company.
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 $126.6 million and pretax income would have
fluctuated by approximately $3.0 million if average foreign exchange rates changed by 10% in 2011. 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 31, 2011 we had no outstanding forward exchange contracts.
Table of Contents
Total
Less than
1 year
1
-
3 years
3
-
5 years
More than
5 years
Contractual Obligations:
Capital lease obligations
$
11,796
$
3,147
$
7,902
$
747
$
-
Non
-cancelable operating leases, net of
subleases
204,425
27,340
67,794
56,379
52,912
Purchase & other obligations
48,013
25,969
11,522
10,522
-
Total contractual obligations
$
264,234
$
56,456
$
87, 218
$
67,648
$
52,912
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