CompUSA 2010 Annual Report Download - page 62

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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 35.9% of our revenue during 2010. 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.
If we fail to observe certain restrictions and covenants under our credit facilities the lenders could refuse to waive such
default, terminate the credit facility and demand immediate repayment, which would adversely affect our cash position and
materially adversely affect our operations.
Our United States/United Kingdom combined revolving credit agreement contains covenants restricting or limiting our
ability to, among other things:
incur additional debt
create or permit liens on assets
make capital expenditures or investments
pay dividends
If we fail to comply with the covenants and other requirements set forth in the credit agreement, we would be in default
and would need to negotiate a waiver agreement with the lenders. Failure to agree on such a waiver could result in the
lenders terminating the credit agreement and demanding repayment of any outstanding borrowings, which could adversely
affect our cash position and adversely affect the availability of financing to us, which could materially impact our
operations.
We depend on bank credit facilities to address our working capital and cash flow needs from time to time, and if
we are unable to renew or replace these facilities, or borrowing capacity were to be reduced our liquidity and
capital resources may be adversely affected.
We require significant levels of capital in our business to finance accounts receivable and inventory. We maintain credit
facilities in the United States and in Europe to finance increases in our working capital if available cash is insufficient.
The amount of credit available to us at any point in time may be adversely affected by the quality or value of the assets
collateralizing these credit lines. In addition, in recent years global financial markets have experienced diminished
liquidity and lending constraints. Our ability to obtain future and/or increased financing to satisfy our requirements as our
business expands could be adversely affected by economic and market conditions, credit availability and lender perception
of our Company and industry.However, we currently have no reason to believe that we will not be able to renew or
replace our facilities when they reach maturity.