CompUSA 2010 Annual Report Download - page 60

9
small dealerships, direct mail distribution, internet-based resellers, large warehouse stores and retail outlets. We also face
competition from manufacturers’ own sales representatives, who sell industrial equipment directly to customers, and from
regional or local distributors. 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 or reporting 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 seek to raise revenues without increasing the tax burden on residents. We rely on United States Supreme Court
decisions which hold that, without Congressional authority, a state may not enforce a sales tax collection obligation on a
company that has no physical presence in the state and whose only contacts with the state are through the use of interstate
commerce such as the mailing of catalogs into the state and the delivery of goods by mail or common carrier. We cannot
predict whether the nature or level of contacts we have with a particular state will be deemed enough to require us to
collect sales tax in that state nor can we be assured that Congress or individual states will not approve legislation
authorizing states to impose tax collection or reporting obligations on all e-commerce and/or direct mail transactions. A
successful assertion by one or more states that we should collect sales tax on the sale of merchandise could result in
substantial tax liabilities related to past sales and would result in considerable administrative burdens and costs for us and
may reduce demand for our products from customers in such states when we charge customers for such taxes.
Events such as acts of war or terrorism, natural disasters, changes in law, or large losses could adversely affect our
insurance coverage and insurance expense, resulting in an adverse affect on our profitability and financial condition.
We insure for certain property and casualty risks consisting primarily of physical loss to property, business interruptions
resulting from property losses, worker’ s compensation, comprehensive general liability, and auto liability. Insurance
coverage is obtained for catastrophic property and casualty exposures as well as those risks required to be insured by law
or contract. Although we believe that our insurance coverage is reasonable, significant events such as acts of war and
terrorism, economic conditions, judicial decisions, legislation, natural disasters and large losses could materially affect our
insurance obligations and future expense.
Changes in accounting standards or practices, as well as new accounting pronouncements or interpretations, may require
us to account for and report our financial results in a different manner in the future, which may be less favorable than the
manner used historically.
A change in accounting standards or practices can have a significant effect on our reported results of operations. New
accounting pronouncements and interpretations of existing accounting rules and practices have occurred and may occur in
the future. Changes to existing rules may adversely affect our reported financial results.
Risks Related to Our Company
We rely to a great extent on our information and telecommunications systems, and significant system failures or outages,
or our failure to properly evaluate, upgrade or replace our systems, or the failure of our security/safety measures to
protect our systems and websites, could have an adverse affect on our results of operations.
We rely on a variety of information and telecommunications systems in our operations. Our success is dependent in large
part on the accuracy and proper use of our information systems, including our telecommunications systems. To manage
our growth, we continually evaluate the adequacy of our existing systems and procedures. We anticipate that we will
regularly need to make capital expenditures to upgrade and modify our management information systems, including
software and hardware, as we grow and the needs of our business change. In particular, our primary financial system is