CDW 2003 Annual Report Download - page 23

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• our pricing strategies;
• changes in product costs from vendors;
• the availability of price protection, purchase discounts and rebate programs from vendors;
• the risk of some of the items in our inventory becoming obsolete;
• the relative mix of products sold during the period;
• general market and competitive conditions; and
• increases in shipping costs that we cannot pass on to customers.
A natural disaster or other adverse occurrence at our primary facility could damage our business. We
operate our business from a primary facility in Vernon Hills, Illinois. Although we have multiple sales office
locations, substantially all of our corporate, warehouse and distribution functions are located at our Vernon Hills
facility. If the warehouse and distribution equipment at our Vernon Hills facility were to be seriously damaged
by a natural disaster or other adverse occurrence, we could utilize third-party distributors to ship products to our
customers. However, this may not be sufficient to avoid interruptions in our service and may not enable us to
meet all of the needs of our customers. Additionally, this would cause us to incur incremental operating costs.
As a result, a natural disaster or other adverse occurrence at our primary facility in Vernon Hills could
negatively impact our business and profitability.
We are heavily dependent on commercial delivery services. We generally ship our products to customers
by Airborne, A.I.T., DHL, Eagle, FedEx, FedEx Ground, United Parcel Service and other commercial delivery
services and invoice customers for shipping charges. If we are unable to pass on to our customers future
increases in the cost of commercial delivery services, our profitability could be adversely affected.
Additionally, strikes or other service interruptions by such shippers could adversely affect our ability to deliver
products on a timely basis.
Our earnings and growth rate could be adversely affected by changes in general economic conditions and
uncertain political conditions. Weak general economic conditions, along with uncertainties in political
conditions, could adversely impact our revenues and growth rate. In addition, our revenues, gross margins and
earnings could deteriorate in the future as a result of unfavorable economic or political conditions.
We could be exposed to additional risks when we make acquisitions or alliances. We may pursue
transactions, including acquisitions or alliances, to extend or complement our existing business. These types of
transactions involve numerous risks, including investor acceptance, finding suitable transaction partners and
negotiating terms that are acceptable to us, the diversion of management’s attention from other business
concerns, entering product or geographic markets in which we have limited experience, the potential loss of key
employees or business relationships and successfully integrating acquired businesses, any of which could
adversely affect our operations or the price of our stock.
The failure to comply with our public sector contracts could result in, among other things, fines or other
liabilities. Revenues from the public sector segment are derived from sales to federal, state and local
governmental departments and agencies, as well as to educational institutions, through various contracts and
open market sales. Government contracting is a highly regulated area. Noncompliance with government
procurement regulations or contract provisions could result in civil, criminal, and administrative liability,
including substantial monetary fines or damages, termination of government contracts, and suspension,
debarment or ineligibility from doing business with the government. The effect of any of these possible actions
by any governmental department or agency could adversely affect our business and results of operations.
State and local sales/use tax collection obligations could reduce our sales and adversely affect our
operating results. Based upon current law, certain of the Company’s subsidiaries currently collect and remit
sales tax only on sales of products into states in which the subsidiaries have a physical presence. The United
States Supreme Court has ruled that the states, absent Congressional legislation, may not impose an obligation to
collect sales/use taxes on a direct marketer whose only contacts with the taxing state are the distribution of
catalogs and other advertisement materials through the mail and the delivery of purchased goods by U.S. mail or
interstate common carriers. We cannot predict the level of contact, including Web activities, with any state