Lumber Liquidators 2007 Annual Report Download - page 24

Increased delivery costs, particularly those relating to the cost of fuel, could harm our results of operations.
We source merchandise from around the world, and our cost of sales includes the cost of delivery to our
Toano facility. In addition, we rely on third-party trucking companies to transport our products from our Toano
facility to our stores and from our stores to our customers. If the cost of fuel or other costs, such as import tariffs,
rise, it could result in increases in our cost of sales and selling, general and administrative expenses due to
additional delivery charges and in the fees transportation companies charge us to transport our products to our
stores and customers. We may be unable to increase the price of our products to offset increased delivery
charges, which could cause our operating results to deteriorate.
If our management information systems experience disruptions, it could disrupt our business and reduce our
sales.
We depend on our management information systems to integrate the activities of our stores, website and call
center, to process orders, to respond to customer inquiries, to manage inventory, to purchase merchandise and to
sell and ship goods on a timely basis. Our high growth rate creates additional challenges in maintaining and
expanding our systems. We may experience operational problems with our information systems as a result of
system failures, viruses, computer “hackers” or other causes. We have identified improvements that we need to
make to our internal controls that relate to limiting access to our information systems, which we expect to
implement over the next eight months. Any significant disruption or slowdown of our systems, including a
disruption or slowdown caused by our failure to successfully upgrade our systems, could cause information,
including data related to customer orders, to be lost or delayed, which could result in delays in the delivery of
products to our stores and customers or lost sales.
In the first quarter of 2007, we upgraded our entire corporate network, including our telephone lines, to an
Internet-based network. If our network is disrupted, we may experience delayed communications within our
operations and between our customers and ourselves, and may not be able to communicate at all via our network,
including via telephones connected to our network.
In the first half of 2008, we plan to introduce a new point-of-sale system to improve the tracking of
inventory and sales information in all of our stores. If the introduction of this system interferes with our existing
system, we could experience disruptions in our ability to stock our stores and fulfill customer orders in a timely
manner.
We may in the future be unable to develop or acquire technology that meets our needs or those of our
customers, or have insufficient resources to make necessary investments in technology. Accordingly, if our
information systems are inadequate to handle our growth or if changes in technology cause our information
systems to become obsolete, it could disrupt or otherwise harm our operations.
Any disruption of our website or our call center could disrupt our business and lead to reduced sales and
reputational damage.
Our website and our call center are integral parts of our integrated multi-channel strategy. Customers use
our website and our call center as information sources on the range of products available to them and to order our
products, samples or catalogs. Our website in particular is vulnerable to certain risks and uncertainties associated
with the Internet, including changes in required technology interfaces, website downtime and other technical
failures, security breaches and consumer privacy concerns. If we cannot successfully maintain our website and
call center in good working order, it could reduce our sales and damage our reputation.
Our success depends substantially upon the continued retention of certain key personnel.
We believe that our success has depended and continues to depend to a significant extent on the efforts and
abilities of our senior management team and our board of directors. Our failure to retain members of that team
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