CDW 2006 Annual Report Download - page 21

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11
• general market and competitive conditions; and
• increases in delivery costs that we cannot pass on to customers.
A natural disaster or other adverse occurrence at one of our primary facilities or data centers
could damage our business. Substantially all of our corporate, warehouse and distribution functions
are located at our Vernon Hills, Illinois facilities and we have a second distribution center in North Las
Vegas, Nevada. If the warehouse and distribution equipment at one of our distribution centers were
to be seriously damaged by a natural disaster or other adverse occurrence, we could utilize the other
distribution center or 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 and would cause us to incur incremental operating costs. In addition, our Berbee
operating segment operates two data centers which may contain business-critical and confidential
information of our customers. A natural disaster or other adverse occurrence at one of the data
centers could negatively impact our business and profitability.
We are heavily dependent on commercial delivery services. We generally ship our products to
customers by AIT, DHL, Eagle, FedEx, United Parcel Service, and other commercial delivery services
and invoice customers for delivery 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 geopolitical conditions. Weak general economic conditions, along with
uncertainties in geopolitical conditions, could adversely impact our revenue and growth rate. In
addition, our revenue, gross margin and earnings could deteriorate in the future as a result of
unfavorable economic or political conditions.
We could be exposed to additional risks if we make additional acquisitions or enter into 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, extending our product or service
offerings into areas in which we have limited experience, entering into new geographic markets, the
potential loss of key coworkers 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 and healthcare
customers, 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.
We are exposed to the risks of a global market. Many of our products are either produced, or
have major components produced, in the Asia Pacific region. We engage in U.S. dollar denominated
transactions with U.S. divisions and subsidiaries of companies located in this region. As a result, we
may be indirectly affected by risks associated with international events, including economic and labor
conditions, political instability, tariffs and taxes, availability of products and currency fluctuations in the
U.S. dollar versus the regional currencies. In the past, countries in the Asia Pacific region have
experienced volatility in their currency, banking and equity markets. Future volatility could adversely
affect the supply and price of products and components and ultimately, our results of operations.