CompUSA 2014 Annual Report Download - page 13

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.
Our United States subsidiaries collect and remit sales tax in states in which the subsidiaries have physical presence or in which we believe
sufficient nexus exists which obligates us to collect sales tax. Other states may, from time to time, claim that we have state-
related
activities constituting physical 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,
regardless of physical presence. Such efforts by states have increased recently, as states seek to raise revenues without increasing the
income 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.
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.
Risks Related to Our Company
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, and are engaged in transitioning key features of our current information
and operating systems to a new platform we have developed specifically for our needs; delays or operational problems in effectively
implementing the transition could have a material adverse effect on our operations. 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. The occurrence of a significant system failure, electrical or telecommunications outages or our failure to
expand or successfully implement new systems could have a material adverse effect on our results of operations.
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Sales tax laws may be changed or interpreted differently 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.
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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.
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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.