CompUSA 2009 Annual Report Download - page 69

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Item 1A. Risk Factors.
There are a number of factors and variables described below that may affect our future results of operations and financial condition.
Other factors of which we are currently not aware or that we currently deem immaterial may also affect our results of operations and
financial position.
Risks Related to the Economy and Our Industries
General economic conditions, such as decreased consumer confidence and spending, reductions in manufacturing
capacity, and inflation could result in our failure to achieve our historical sales growth rates and profit levels.
Current economic conditions may cause the loss of consumer confidence in the Company’ s markets which may result in a
decrease of spending in the categories of products we sell. With conditions in the market for technology products
remaining highly competitive, reductions in our retail prices, as we experienced in 2009, would adversely affect our
revenues and profits. It is also possible that as manufacturers react to the marketplace they may reduce manufacturing
capacity or allocations to their customers creating shortages of product. Both we and our customers are subject to global
political, economic and market conditions, including inflation, interest rates, energy costs, the impact of natural disasters,
military action and the threat of terrorism. Our consolidated results of operations are directly affected by economic
conditions in North America and Europe. We may experience a decline in sales as a result of poor economic conditions
and the lack of visibility relating to future orders. Our results of operations depend upon, among other things, our ability to
maintain and increase sales volumes with existing customers, our ability to limit price reductions and maintain our
margins, our ability to attract new customers and the financial condition of our customers. A decline in the economy that
adversely affects our customers, causing them to limit or defer their spending, would likely adversely affect our sales,
prices and profitability as well. We cannot predict with any certainty whether we will be able to maintain or improve upon
historical sales volumes with existing customers, or whether we will be able to attract new customers.
In response to economic and market conditions, from time to time we have undertaken initiatives to reduce our cost
structure where appropriate. These initiatives, as well as any future workforce and facilities reductions, may not be
sufficient to meet current and future changes in
economic and market conditions and allow us to continue to achieve the growth rates and levels of profitability we have
recently experienced. In addition, costs actually incurred in connection with our restructuring actions may be higher than
our estimates of such costs and/or may not lead to the anticipated cost savings.
The markets for our products and services are extremely competitive and if we are unable to successfully respond to our
competitors’ strategies our sales and gross margins will be adversely affected.
We may not be able to compete effectively with current or future competitors. The markets for our products and services
are intensely competitive and subject to constant technological change. We expect this competition to further intensify in
the future. Competitive factors include price, availability, service and support. We compete with a wide variety of other
resellers and retailers, as well as manufacturers. Many of our competitors are larger companies with greater financial,
marketing and product development resources than ours. In addition, new competitors may enter our markets. This may
place us at a disadvantage in responding to competitors’ pricing strategies, technological advances and other initiatives,
resulting in our inability to increase our revenues or maintain our gross margins in the future.
In most cases our products compete directly with those offered by other manufacturers and distributors. If any of our
competitors were to develop products or services that are more cost-effective or technically superior, demand for our
product offerings could decrease.
Our gross margins are also dependent on the mix of products we sell and could be adversely affected by a continuation of
our customers’ shift to lower-priced products.
State sales tax laws may be changed which could result in ecommerce and direct mail retailers having to collect sales
taxes in states where the current laws do not require us to do so. This could reduce demand for our products in such
states and could result in us having substantial tax liabilities for past sales.
Our United States subsidiaries collect and remit sales tax in states in which the subsidiaries have physical presence or in
which we believe nexus exists which obligates us to collect sales tax. Other states may, from time to time, claim that we
have state-related activities constituting a sufficient nexus to require such collection. Additionally, many other states seek
to impose sales tax collection obligations on companies that sell goods to customers in their state, or directly to the state
and its political subdivisions, even without a physical presence. Such efforts by states have increased recently, as states