Radio Shack 2010 Annual Report Download - page 19

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Fair Labor Standards Act and ERISA, each as amended,
and regulations promulgated by the Federal Trade
Commission, SEC, Internal Revenue Service, United States
Department of Labor, Occupational Safety and Health
Administration, and Environmental Protection Agency.
Failure to properly adhere to these and other applicable
laws, rules and regulations could result in the imposition of
penalties or adverse legal judgments and could materially
adversely affect our results of operations and financial
condition. Similarly, the cost of complying with newly-
implemented laws, rules and regulations could materially
adversely affect our business and our results of operations.
Risks associated with the suppliers from whom our raw
materials and products are sourced could materially
adversely affect our results of operations and financial
condition.
We utilize a large number of suppliers located in various
parts of the world to obtain raw materials, private brand
merchandise, and other products. If any of our key vendors
fail to supply us with products, we may not be able to meet
the demands of our customers, and our sales and
profitability could be materially adversely affected.
We purchase a significant portion of our inventory from
manufacturers located in China. Changes in trade
regulations (including tariffs on imports) could increase the
cost of those items. Although our purchases are
denominated in U.S. dollars, changes in the Chinese
currency exchange rate against the U.S. dollar or other
foreign currencies could cause our vendors to increase the
prices of items we purchase from them. The occurrence of
any of these events could materially adversely affect our
results of operations.
Our ability to find qualified vendors that meet our standards
and supply products in a timely and efficient manner is a
significant challenge, especially with respect to goods
sourced from outside the United States. Merchandise
quality issues, product safety concerns, trade restrictions,
difficulties in enforcing intellectual property rights in foreign
countries, work stoppages, transportation capacity and
costs, tariffs, political or financial instability, foreign currency
exchange rates, monetary, tax and fiscal policies, inflation,
deflation, outbreak of pandemics and other factors relating
to foreign trade are beyond our control. These and other
issues affecting our vendors could materially adversely
affect our sales and profitability.
Our business is heavily dependent upon information
systems, which could result in higher maintenance
costs and business disruption.
Our business is heavily dependent upon information
systems, given the number of individual transactions we
process each year. Our information systems include an in-
store point-of-sale system that helps us track sales
performance, inventory replenishment, product availability,
product margin and customer information. In addition, we
are in the process of upgrading our in-store point-of-sale
system and related processes. These systems are complex
and require integration with each other, with some of our
service providers, and with our business processes, which
may increase the risk of disruption.
Our information systems are also subject to damage or
interruption from power outages, computer and
telecommunications failures, computer viruses, security
breaches, catastrophic events and usage errors by our
employees. If we encounter damage to our systems,
difficulty implementing new systems, or difficulty
maintaining and upgrading current systems, our business
operations could be disrupted, our sales could decline, and
our expenses could increase.
Failure to protect the integrity and security of our
customers’ information could materially damage our
standing with our customers and expose us to
litigation.
Increasing costs associated with information security
including increased investments in technology, the costs of
compliance with consumer protection laws, and costs
resulting from consumer fraud could materially adversely
affect our results of operations. Additionally, if a significant
compromise in the security of our customer information,
including personal identification data, were to occur, it could
materially adversely affect our reputation, results of
operations, financial condition, and business operations
and could increase the costs we incur to protect against
such security breaches.
We are subject to other litigation risks and may face
liabilities as a result of allegations and negative
publicity.
Our operations expose us to litigation risks, such as class
action lawsuits involving employees, consumers and
shareholders. For example, from time to time putative class
actions have been brought against us relating to various
labor matters. Defending against lawsuits and other
proceedings may involve significant expense and divert
management’s attention and resources from other matters.
In addition, if any lawsuits were brought against us and
resulted in a finding of substantial legal liability, it could
cause significant reputational harm to us and otherwise
materially adversely affect our results of operations,
financial condition, and business operations.
We conduct business outside the United States, which
presents potential risks.
We have offices, assets, and generate a portion of our
revenue in Mexico, China, including the special
administrative region of Hong Kong, and Taiwan. Part of