CDW 2015 Annual Report Download - page 15

Table of Contents
In addition, our financial results could be adversely affected by financial adjustments required by accounting principles generally accepted in the United States of
America (“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 cause the market price of our common stock to be
volatile and 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 general macroeconomic conditions; 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.
Fluctuations in foreign currency have an effect on our reported results of operations.
Our exposure to fluctuations in foreign currency rates results primarily from the translation exposure associated with the preparation of our Consolidated Financial
Statements. While our Consolidated Financial Statements are reported in U.S. dollars, the financial statements of our subsidiaries outside the U.S. are prepared using the
local currency as the functional currency and translated into U.S. dollars. As a result, fluctuations in the exchange rate of the U.S. dollar relative to the local currencies of our
international subsidiaries, particularly the British pound and the Canadian dollar, could cause fluctuations in our reported results of operations. We also have foreign currency
exposure to the extent sales and purchases are not denominated in a subsidiary’s functional currency, such as sales and purchases in euros, which 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 the form of cease-and-desist letters, licensing inquiries, lawsuits and other communications
and demands. In our industry, such intellectual property claims have become more frequent as the complexity of technological products and the intensity of competition in
our industry have increased. Increasingly, many of these assertions are brought by non-practicing entities whose principal business model is to secure patent licensing
revenue, but we may also be subject to suits from inventors, competitors or other patent holders who may seek licensing revenue, lost profits and/or an injunction preventing
us from engaging in certain activities, including selling certain products and services.
Because of our significant sales to governmental entities, we also are subject to audits by federal, state, international, national, provincial and local authorities. We
also are subject to audits by various vendor partners and large customers, including government agencies, relating to purchases and sales under various contracts. In addition,
we are subject to indemnification claims under various contracts.
Current and future litigation, infringement claims, governmental proceedings and investigations, audits or indemnification claims that we face, including the SEC’s
investigation of our vendor partner program incentives, may result in substantial costs and expenses and significantly divert the attention of our management regardless of the
outcome. In addition, these matters could lead to increased costs or interruptions of our normal business operations. Litigation, infringement claims, governmental
proceedings and investigations, audits or indemnification claims involve uncertainties and the eventual outcome of any such matter could adversely affect our business,
results of operations or cash flows.
14