CompUSA 2011 Annual Report Download - page 12

We purchase substantially all of our technology products from major distributors and directly from large manufacturers who may deliver
those products directly to our customers. These relationships enable us to make available to our customers a wide selection of products
without having to maintain large amounts of inventory. The termination or interruption of our relationships with any of these suppliers
could materially adversely affect our business.
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. Our ability to find
qualified vendors who meet our standards and supply products in a timely and efficient manner is a significant challenge, especially with
respect to goods sourced from outside the U.S. Political or financial instability, merchandise quality issues, product safety concerns, trade
restrictions, work stoppages, tariffs, foreign currency exchange rates, transportation capacity and costs, inflation, civil unrest, outbreaks of
pandemics and other factors relating to foreign trade are beyond our control. These and other issues affecting our vendors could materially
adversely affect our revenue and gross profit .
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.
Many product suppliers provide us with coop 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 coop 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.
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.
We operate internationally and as a result, we are subject to risks associated with doing business globally. Risks inherent to operating
overseas include:
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We rely on third party suppliers for most of our products and services. The loss or interruption of these relationships could impact our
sales volumes, the levels of inventory we must carry, and/or result in sales delays and/or higher inventory costs from new suppliers. Coop
advertising and other sales incentives provided by our suppliers could decrease in the future thereby increasing our expenses and
adversely affecting our results of operations and cash flows.
•
Goodwill and intangible assets may become impaired resulting in a charge to earnings.
• 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
.
• Changes in a country’s economic or political conditions
•
Changes in foreign currency exchange rates
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