Tech Data 2015 Annual Report Download - page 12

Table of Contents
ITEM 1A. Risk Factors.
The following are certain risk factors that could affect our business, financial position and results of operations. These risk factors should be
considered in connection with evaluating the forward-looking statements contained in this Annual Report on Form 10-K because these factors
could cause the actual results and conditions to differ materially from those projected in the forward-looking statements. Before you buy our
common stock or other securities, you should know that making such an investment involves risks, including the risks described below. The
risks that have been highlighted below are not the only risks of our business. If any of the risks actually occur, our business, financial condition
or results of operations could be negatively affected. In that case, the trading price of our common stock or other securities could decline, and
you may lose all or part of your investment. Risk factors that could cause actual results to differ materially from our forward
-looking
statements are as follows:
Our ability to earn profit is more challenging when sales slow from a down economy as a result of gross profit declining faster than
cost reduction efforts taking effect.
High levels of unemployment in the markets we serve, as well as austerity measures that may be implemented by governments in those
markets, can constrain economic growth resulting in lower demand for the products and services we sell. When we experience a rapid decline
in demand for products we experience more difficulty in achieving the gross profit and operating profit we desire due to the lower sales and
increased pricing pressure. The economic environment may also result in changes in vendor terms and conditions, such as rebates, cash
discounts and cooperative marketing efforts, which may also result in downward pressure on our gross profit. As a result, there is pressure to
reduce the cost of operations in order to maximize operating profits. To the extent we cannot reduce costs to offset such decline in gross profits,
our operating margins typically deteriorate. The benefits from cost reductions may also take longer to fully realize and may not fully mitigate
the impact of the reduced demand. Should we experience a decline in operating profits, especially in Europe, the valuations we develop for
purposes of our goodwill impairment test may be adversely affected, potentially resulting in impairment charges. Deterioration in the financial
and credit markets heightens the risk of customer bankruptcies and delays in payment. Future deterioration in the credit markets could result in
reduced availability of credit insurance to cover customer accounts. This, in turn, may result in our reducing the credit lines we provide to
customers, thereby having a negative impact on our net sales.
Our competitors can take more market share by reducing prices on key vendor products that contribute the most to our profitability.
The Company operates in a highly competitive environment. The technology distribution industry is characterized by intense competition,
based primarily on product availability, credit terms and availability, price, effectiveness of information systems and e-commerce tools, speed
of delivery, ability to tailor specific solutions to customer needs, quality and depth of product lines and training, service and support. Our
customers are not required to purchase any specific volume of products from us and may move business if pricing is reduced by competitors,
resulting in lower sales. As a result, we must be extremely flexible in determining when to reduce price to maintain market share and sales
volumes and when to allow our sales volumes to decline to maintain the quality of our profitability. The Company competes with a variety of
regional, national and international wholesale distributors, some of which may have greater financial resources than the Company.
We are dependent on internal information and telecommunications systems, and any failure of these systems, including system security
breaches, data protection breaches, or other cybersecurity attacks, may negatively impact our business and results of operations.
The Company is highly dependent upon its internal information and telecommunications systems to operate its business. Failures of our
internal information or telecommunications systems may prevent us from taking customer orders, shipping products and billing customers.
Sales may also be impacted if our customers are unable to access our pricing and product availability information. Additionally, if the
Company were to experience a security breakdown, disruption or breach that compromised sensitive information, it could harm our
relationships with vendors and customers. The occurrence of any of these events could have a negative impact on our business and results of
operations.
We may not be able to ship products if our third party shipping companies cease operations temporarily or permanently.
The Company relies on arrangements with independent shipping companies for the delivery of its products from vendors and to customers. The
failure or inability of these shipping companies to deliver products, or the unavailability of their shipping services, even temporarily, may have
an adverse effect on the Company's business.
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