CompUSA 2008 Annual Report Download - page 50

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Increased costs associated with corporate governance compliance may impact our results of
operations.
As a public company, we incur significant legal, accounting and other expenses that we would
not incur as a private company. In addition, the Sarbanes-Oxley Act of 2002, as well as rules
subsequently implemented by the Securities and Exchange Commission and listing
requirements subsequently adopted by the New York Stock Exchange in response to Sarbanes-
Oxley, have required changes in corporate governance practices of public companies. These
developments have substantially increased our legal compliance, auditing and financial
reporting costs and made them more time consuming. These developments may also make it
more difficult and more expensive for us to obtain directors’ and officers’ liability insurance
and we may be required to accept reduced coverage or incur substantially higher costs to
obtain coverage, possibly making it more difficult for us to attract and retain qualified
members of our board of directors, particularly to serve on our audit committee.
Our success is dependent upon the availability of credit and financing.
We require significant levels of capital in our business to finance accounts receivable and
inventory. We maintain credit facilities in the United States and in Europe to finance increases
in our working capital if available cash is insufficient. The amount of credit available to us at
any point in time may be adversely affected by the quality or value of the assets collateralizing
these credit lines. In addition, if we are unable to renew or replace these facilities at maturity
our liquidity and capital resources may be adversely affected. However, we currently have no
reason to believe that we will not be able to renew or replace our facilities when they reach
maturity.
Sales to individual consumers exposes us to credit card fraud, which could adversely affect our
business.
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.
Our income tax rate and the value of our deferred tax assets are subject to change.
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.
We may encounter risks in connection with sales of our web-hosted software application.
In 2004, we introduced our web-based and hosted, on-demand software suite of products,
marketed as PCS ProfitCenter Software™. We have a limited operating history with this type
of product offering and may encounter risks inherent in the software industry, including but
not limited to: