CompUSA 2009 Annual Report Download - page 71

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Our PC products contain electronic components, subassemblies and software that in some cases are supplied through sole
or limited source third-party suppliers, some of which are located outside of the U.S. Although we do not anticipate any
problems procuring supplies in the near-term, there is no assurance that parts and supplies will be available in a timely
manner and at reasonable prices. Any loss of, or interruption of, supply from key suppliers may require us to find new
suppliers. This could result in production or development delays while new suppliers are located, which could
substantially impair operating results. If the availability of these or other components used in the manufacture of our
products was to decrease, or if the prices for these components were to increase significantly, operating costs and expenses
could be adversely affected.
We purchase a number of our products from vendors outside of the United States. Difficulties encountered by one or
several of these suppliers could halt or disrupt production and delay completion or cause the cancellation of our orders.
Delays or interruptions in the transportation network could result in loss or delay of timely receipt of product required to
fulfill customer orders.
Many product suppliers provide us with co-op advertising support in exchange for featuring their products in our catalogs
and on our internet sites. Certain suppliers provide us with other incentives such as rebates, reimbursements, payment
discounts, price protection and other similar arrangements. These incentives are offset against cost of goods sold or
selling, general and administrative expenses, as applicable. The level of co-op advertising support and other incentives
received from suppliers may decline in the future, which could increase our cost of goods sold or selling, general and
administrative expenses and have an adverse effect on results of operations and cash flows.
Goodwill and intangible assets may become impaired resulting in a charge to earnings.
The acquisition of certain assets of CompUSA, CircuitCity and the purchase of the stock of WStore Europe SA resulted in
the recording of significant intangible assets and or goodwill. We are required to test goodwill and intangible assets
annually to determine if the carrying values of these assets are impaired or on a more frequent basis if indicators of
impairment exist. If any of our goodwill or intangible assets are determined to be impaired we may be required to record a
significant charge to earnings in the period during which the impairment is discovered.
Our substantial international operations are subject to risks such as fluctuations in currency rates (which can adversely
impact foreign revenues and profits when translated to US Dollars), foreign regulatory requirements, political uncertainty
and the management of our growing international operations.
We operate internationally and as a result, we are subject to risks associated with doing business globally. Risks inherent
to operating overseas include:
Changes in a country’ s economic or political conditions
Changes in foreign currency exchange rates
Difficulties with staffing and managing international operations
Unexpected changes in regulatory requirements
For example, we currently have operations located in numerous countries outside the United States, and non-U.S. sales
(Europe, Canada and Puerto Rico) accounted for approximately 33.5% of our revenue during 2009. To the extent the U.S.
dollar strengthens against foreign currencies, our foreign revenues and profits will be reduced when translated into U.S.
dollars.
We are exposed to various inventory risks, such as being unable to profitably resell excess or obsolete inventory and/or
the loss of product return rights and price protection from our vendors; such events could lower our gross margins or
result in inventory write-downs that would reduce reported future earnings.
Our inventory is subject to risk due to technological change and changes in market demand for particular products. If we
fail to manage our inventory of older products we may have excess or obsolete inventory. We may have limited rights to
return purchases to certain suppliers and we may not be able to obtain price protection on these items. The elimination of
purchase return privileges and lack of availability of price protection could lower our gross margin or result in inventory
write-downs.
We also take advantage of attractive product pricing by making opportunistic bulk inventory purchases; any resulting
excess and/or obsolete inventory that we are not able to re-sell could have an adverse impact on our results of operations.
Any inability to make such bulk inventory purchases may significantly impact our sales and profitability.