RICHMOND, Va., Nov. 10 /PRNewswire-FirstCall/ -- Circuit City Stores, Inc.
(NYSE: CC) today announced that it has filed a voluntary petition for
reorganization relief under Chapter 11 of the United States Bankruptcy Code in
the United States Bankruptcy Court for the Eastern District of Virginia
("Bankruptcy Court") in Richmond, Va. The company plans to continue operating
the business without interruption as management focuses on developing and
executing a comprehensive corporate restructuring plan. Circuit City's
Canadian operations also will be seeking protection under the Companies'
Creditors Arrangement Act in Canada ("CCAA").
In conjunction with the filing, Circuit City is seeking customary
authority from the Bankruptcy Court that will enable it to continue operating
its business and serving its customers in the ordinary course. The requested
approvals include requests for the authority to make wage and salary payments
and continue various benefits for employees as well as honor customer programs
such as returns, exchanges and gift cards. In addition, Circuit City has
negotiated a commitment for a $1.1 billion debtor-in-possession (DIP)
revolving credit facility to supplement its working capital. The DIP facility
replaces the company's $1.3 billion asset-based credit facility and is being
provided by the same lenders. The facility provides additional immediate
liquidity while the company works to reorganize the business and will permit
the company to pay vendors and other business partners for goods and services
received after the filing.
Circuit City recently announced that it was taking certain actions to
address the company's financial condition and deteriorating liquidity
position. Despite aggressive efforts to secure vendor support, vendor
concerns about the company's liquidity and ability to pay for its purchases in
this difficult economic climate have escalated considerably since the company
provided a liquidity update on November 3, 2008, further impairing the
company's ability to conduct business and provide service to its customers.
Faced with the need to secure ongoing vendor support and to ensure adequate
merchandise flow to stores during the important holiday season, the company
has determined that it would be in the best interest of its stakeholders to
file for reorganization relief under Chapter 11. Operating under the
protection of Chapter 11 will provide the company's vendors with assurances
that they will be paid for merchandise the company receives post-filing so the
company can be sufficiently stocked for the holiday selling season. Further,
the company intends to create a restructuring plan that should allow Circuit
City to emerge as a stronger business with an improved national distribution
channel for its vendors and a more compelling offering for its customers.
The company recognizes that, to achieve these objectives, there is a
critical need to create a more efficient chain with a streamlined cost
structure. As previously announced, the company is in the process of closing
155 domestic segment stores. This week, the company took action to realign
its regional and district support structure commensurate with the smaller
store base, which will include approximately 566 stores when the domestic
segment store closings are completed. As a further cost-saving measure, the
company reduced its corporate headquarters workforce on November 7, 2008.
These corporate, regional and district support reductions totaled
approximately 700 positions and are in addition to the reductions resulting
from the store closings. The store closings and support workforce reductions
will result in a combined domestic workforce and store base reduction of
approximately 20 percent.
Under the protection of Chapter 11, the company plans to build on these
recent restructuring initiatives. Through the additional flexibility that the
bankruptcy process provides the company to restructure its operations, the
company will continue its real estate rationalization by taking immediate
steps to reject the leases at its previously closed locations. Further, as
part of its restructuring efforts, the company will continue to assess the
productivity of all assets, review additional cost-cutting initiatives and
explore strategic alternatives to maximize the value of the business.
James A. Marcum, vice chairman and acting president and chief executive
officer of Circuit City Stores, Inc., said, "We recently have taken intensive
measures to overcome our deteriorating liquidity position. The decision to
restructure the business through a Chapter 11 filing should provide us with
the opportunity to strengthen our balance sheet, create a more efficient
expense structure and ultimately position the company to compete more
effectively. In the meantime, our stores remain fully operational, and our
associates are focused on consistent and successful execution this holiday
season and beyond.
"We appreciate the support we have received from our lenders in the midst
of such a tight credit market. With this support, we believe we have the
opportunity to leverage our market position and the strength of our brand to
restore Circuit City to solid financial footing," continued Marcum.
"We understand how difficult the recent announcements have been on
everyone at the company, and we recognize the changes personally affect many
people. Further, we know there is never a good time for individuals to be
impacted by decisions like these, and we deeply regret the effect this has on
our associates. I want to thank them for their continued loyalty and
dedicated effort as we go forward with the belief that implementing long-term
and lasting change to our business will come by satisfying our customers, one
at a time," concluded Marcum.
Additional Information
Circuit City Advantage Protection Plans(R) are product warranty and
service plans sold by the company on behalf of unrelated third parties who are
the primary obligors. As a result, these warranty and service plans are not
subject to change as a result of the company's Chapter 11 filing. Likewise,
Circuit City co-branded credit cards are offered by Chase Card Services and
are not impacted by the company's Chapter 11 filing.
Additional information on today's announcement can be found by visiting
the company's investor information home page at
http://investor.circuitcity.com and clicking the link for "Breaking News" and
at the Claims Agent's Web site at www.kccllc.net/circuitcity.
About Circuit City Stores, Inc.
Circuit City Stores, Inc. (NYSE: CC) is a leading specialty retailer of
consumer electronics and related services. At October 31, the domestic
segment operated 712 Superstores and 9 outlet stores in 165 U.S. media
markets. At September 30, the international segment operated through 770
retail stores and dealer outlets in Canada. Circuit City also operates Web
sites at www.circuitcity.com, www.thesource.ca and www.firedog.com.
Forward-Looking Statements
Statements made in this release, other than those concerning historical
financial information, may be considered forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995 and are
subject to risks and uncertainties. These forward-looking statements include,
without limitation, statements regarding the company's expectations concerning
the bankruptcy process, the continuation of day-to-day operations and payments
to vendors and employees in the ordinary course. Actual results may differ
materially from those included in the forward-looking statements due to a
number of factors, including, without limitation, the following: (1) the
impact of today's announcement on the company's operations; (2) the ability of
the company to continue as a going concern; (3) the ability of the company to
obtain approval of and operate pursuant to the terms of the DIP facility; (4)
the ability of the company to obtain court approval of the company's first day
papers and other motions in the Chapter 11 proceeding pursued by it from time
to time; (5) the ability of the company to develop, pursue, confirm and
consummate one or more plans of reorganization with respect to the Chapter 11
cases; (6) risks associated with third parties seeking and obtaining court
approval to terminate or shorten the exclusivity period for the company to
propose and confirm one or more plans of reorganization, for the appointment
of a Chapter 11 trustee or to convert the cases to Chapter 7 cases; (7) the
ability of the company to obtain and maintain normal terms with vendors and
service providers; (8) the ability of the company to maintain contracts that
are critical to its operations; (9) potential adverse developments with
respect to the company's liquidity or results of operations; (10) the ability
of the company to fund and execute its business plan; (11) the ability of the
company to attract, retain and compensate key executives and associates; (12)
the ability of the company to attract and retain customers; (13) any further
deterioration in the macroeconomic environment or consumer confidence; (14)
the success of the company's store liquidators, and the prices obtained, in
selling inventory in the stores that the company is closing; and (15) the
company's receipt of the income tax refund from the federal government.
Discussion of additional factors that could cause actual results to differ
materially from management's projections, forecasts, estimates and
expectations is set forth under Management's Discussion and Analysis of
Results of Operations and Financial Condition in the Circuit City Stores, Inc.
annual report on Form 10-K for the fiscal year ended February 29, 2008, the
quarterly report on Form 10-Q for the fiscal quarter ended August 31, 2008,
and in the company's other SEC filings. A copy of the annual report is
available on the company's investor information Web site at
http://investor.circuitcity.com.
(Logo: http://www.newscom.com/cgi-bin/prnh/20010709/CCLOGO )
SOURCE Circuit City Stores, Inc.
