CDW 2012 Annual Report Download - page 17

Table of Contents
We are heavily dependent on commercial delivery services.
We generally ship hardware products to our customers by 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.
We are exposed to accounts receivable and inventory risks.
We extend credit to our customers for a significant portion of our net sales, typically on 30-day payment terms. We are subject to the
risk that our customers may not pay for the products they have purchased, or may pay at a slower rate than we have historically experienced, the
risk of which is heightened during periods of economic downturn or uncertainty or, in the case of Public segment customers, during periods of
budget constraints.
We are also exposed to inventory risks as a result of the rapid technological changes that affect the market and pricing for the products
we sell. We seek to minimize our inventory exposure through a variety of inventory management procedures and policies, including our rapid-
turn inventory model, as well as vendor price protection and product return programs. However, if we were unable to maintain our rapid-turn
inventory model, if there were unforeseen product developments that created more rapid obsolescence or if our vendor partners were to change
their terms and conditions, our inventory risks could increase. We also from time to time take advantage of cost savings associated with certain
opportunistic bulk inventory purchases offered by our vendor partners or we may decide to carry high inventory levels of certain products that
have limited or no return privileges due to customer demand or request. These bulk purchases could increase our exposure to inventory
obsolescence.
We could be exposed to additional risks if we make acquisitions or enter into alliances.
We may pursue transactions, including acquisitions or alliances, in an effort to extend or complement our existing business. These types
of transactions involve numerous risks, including 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.
In addition, our financial results could be adversely affected by financial adjustments required by GAAP in connection with these types
of transactions where significant goodwill or intangible assets are recorded. To the extent the value of goodwill or identifiable intangible assets
with indefinite lives becomes impaired, we may be required to incur material charges relating to the impairment of those assets.
Our future operating results may fluctuate significantly.
We may experience significant variations in our future quarterly results of operations. These fluctuations may result from many factors,
including the condition of the technology industry in general, shifts in demand and pricing for hardware, software and services and the
introduction of new products or upgrades.
Our operating results are also highly dependent on our level of gross profit as a percentage of net sales. Our gross profit percentage
fluctuates due to numerous factors, some of which may be outside of our control, including pricing pressures; changes in product costs from our
vendor partners; the availability of price protection, purchase discounts and incentive programs from our vendor partners; changes in product,
order size and customer mix; the risk of some items in our inventory becoming obsolete; increases in delivery costs that we cannot pass on to
customers; and general market and competitive conditions.
In addition, our cost structure is based, in part, on anticipated sales and gross margins. Therefore, we may not be able to adjust our cost
structure quickly enough to compensate for any unexpected sales or gross margin shortfall, and any such inability could have an adverse effect
on our business, results of operations or cash flows.
We are exposed to risks from legal proceedings and audits.
We are party to various legal proceedings that arise in the ordinary course of our business, which include commercial, employment, tort
and other litigation.
We are subject to intellectual property infringement claims against us in the ordinary course of our business, either because of the
products and services we sell or the business systems and processes we use to sell such products and services, in
14