LensCrafters 2010 Annual Report Download - page 62

ANNUAL REPORT 2010> 60 |
of virtually all matters submitted to a vote of our stockholders, including the election of our directors, the amendment
of our Articles of Association or By–laws, and the approval of mergers, consolidations and other significant corporate
transactions.
Mr. Del Vecchio’s interests may conflict with or differ from the interests of our other stockholders. In situations involving
a conflict of interest between Mr. Del Vecchio and our other stockholders, Mr. Del Vecchio may exercise his control
in a manner that would benefit himself to the potential detriment of other stockholders. Mr. Del Vecchio’s significant
ownership interest could delay, prevent or cause a change in control of our company, any of which may be adverse to the
interests of our other stockholders.
O) IF OUR PROCEDURES DESIGNED TO COMPLY WITH SECTION 404 OF THE SARBANES–OXLEY ACT OF 2002
CAUSE US TO IDENTIFY MATERIAL WEAKNESSES IN OUR INTERNAL CONTROL OVER FINANCIAL REPORTING,
THE TRADING PRICE OF OUR SECURITIES MAY BE ADVERSELY IMPACTED
The Luxottica Group management has assessed our internal control over financial reporting, as required under Section 404
of the U.S. Sarbanes–Oxley Act of 2002, as amended. There are inherent limitations on the effectiveness of internal controls,
including collusion, management override and failure of human judgment. In addition, control procedures are designed to
reduce, rather than eliminate, business risks. As a consequence of the systems and procedures we have implemented to
comply with these requirements, we may uncover circumstances that we determine, with the assistance of our independent
auditors, to be material weaknesses, or that otherwise result in disclosable conditions.
Any identified material weaknesses in our internal control structure may involve significant effort and expense to remediate,
and any disclosure of such material weaknesses or other disclosable conditions may result in a negative market reaction to
our securities.
P) WE RELY ON INFORMATION TECHNOLOGY IN OUR OPERATIONS, AND ANY MATERIAL FAILURE,
INADEQUACY, INTERRUPTION OR SECURITY FAILURE OF THAT TECHNOLOGY COULD HARM OUR ABILITY
TO EFFECTIVELY OPERATE OUR BUSINESS
We rely on information technology systems across our operations, including for management of our supply chain,
point–of–sale processing in our stores and various other processes and transactions. Our ability to effectively manage
our business and coordinate the production, distribution and sale of our products depends on, among other things, the
reliability and capacity of these systems. The failure of these systems to operate effectively, network disruptions, problems
with transitioning to upgraded or replacement systems, or a breach in data security of these systems could cause delays in
product supply and sales, reduced efficiency of our operations, unintentional disclosure of customer or other confidential
information of the Company, or damage to our reputation, and potentially significant capital investments could be required
to remediate the problem, which could have a material adverse effect on our results of operations.
Q) IF WE RECORD A WRITE–DOWN FOR INVENTORIES OR OTHER ASSETS THAT ARE OBSOLETE OR EXCEED
ANTICIPATED DEMAND OR NET REALIZABLE VALUE, SUCH CHARGES COULD HAVE A MATERIAL ADVERSE
EFFECT ON OUR RESULTS OF OPERATIONS
We record a write–down for product and component inventories that have become obsolete or exceed anticipated
demand or net realizable value. We review our long–lived assets for impairment whenever events or changed circumstances
indicate that the carrying amount of an asset may not be recoverable, and we determine whether valuation allowances are
needed against other assets, including, but not limited to, accounts receivable. If we determine that impairments or other
events have occurred that lead us to believe we will not fully realize these assets, we record a write–down or a valuation
allowance equal to the amount by which the carrying value of the assets exceeds their fair market value. Although we
believe our inventory and other asset–related provisions are currently adequate, no assurance can be made that, given
the rapid and unpredictable pace of product obsolescence for fashion eyewear, we will not incur additional inventory or
asset–related charges, which charges could have a material adverse effect on our results of operations.