CompUSA 2009 Annual Report Download - page 85

Download and view the complete annual report

Please find page 85 of the 2009 CompUSA annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 116

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116

25
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, 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 $109.3
million and pre tax income would have fluctuated by approximately $1.8 million if average foreign exchange rates changed by 10% in
2009. 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, 2009 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 31, 2009, 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.
Item 8. Financial Statements and Supplementary Data.
The information required by Item 8 of Part II is incorporated herein by reference to the Consolidated Financial Statements filed with
this report; see Item 15 of Part IV.
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of the Company’ s management, including the Company’ s Chief Executive Officer
and Chief Financial Officer, the Company carried out an evaluation of the effectiveness of the design and operation of the Company’ s
disclosure controls and procedures as of December 31, 2009. Based upon this evaluation, the Company’ s Chief Executive Officer and
Chief Financial Officer have concluded that the Company’ s disclosure controls and procedures are effective.
Inherent Limitations of Internal Controls over Financial Reporting
The Company’ s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. The Company’ s internal control over financial reporting includes those policies and procedures that: (i) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’ s
assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that the Company’ s receipts and expenditures are being made only in
accordance with authorizations of the Company’ s management and directors; and (iii) provide reasonable assurance regarding