LensCrafters 2011 Annual Report Download - page 111

| 35 >MANAGEMENT REPORT
inherent uncertainties in intellectual property disputes and the significant expense
in defending such claims. An adverse determination in any dispute involving its
proprietary rights could, among other things, (i) require the Group to grant licenses
to, or obtain licenses from, third parties, (ii) prevent the Group from manufacturing
or selling its products, (iii) require us to discontinue the use of a particular patent,
trademark, copyright or trade secret or (iv) subject the Group to substantial liability.
Any of these possibilities could have a material adverse effect on the business of the
Group by reducing its future sales or causing the Group to incur significant costs to
defend its rights.
l) If the Group is unable to maintain its current operating relationship with host stores
of its Licensed Brands division, the Group could suffer a loss in sales and possible
impairment of certain intangible assets
The Group’s sales depend in part on its relationships with the host stores that allow it
to operate its Licensed Brands division, including Sears Optical and Target Optical. The
Group leases and licenses with Sears Optical are terminable upon short notice. If the
Group’s relationship with Sears Optical or Target Optical were to end, the Group would
suffer a loss of sales and the possible impairment of certain intangible assets. This could
have a material adverse effect on the Group’s business, results of operations, financial
condition and prospects.
m) If the Group fails to maintain an efficient distribution network in its highly competitive
markets, its business, results of operations and financial condition could suffer
The mid– and premium–price categories of the prescription frame and sunglasses markets
in which the Group operates are highly competitive. The Group believes that, in addition to
successfully introducing new products, responding to changes in the market environment
and maintaining superior production capabilities, its ability to remain competitive is highly
dependent on its success in maintaining an efficient distribution . If the Group is unable to
maintain an efficient distribution , its sales may decline due to the inability to timely deliver
products to customers and its profitability may decline due to an increase in its per unit
distribution costs in the affected regions, which may have a material adverse impact on its
business, results of operations and financial condition.
n) If the Group was to become subject to adverse judgments or determinations in legal
proceedings to which the Group is, or may become, a party, its future profitability could
suffer through a reduction of sales or increased costs and damage to its reputation
due to its failure to adequately communicate the impact of such proceedings or their
outcome to the investor and business communities
The Group is currently a party to certain legal proceedings as described in its consolidated
financial statements as of December 31, 2011. In addition, in the ordinary course of its
business, the Group becomes involved in various other claims, lawsuits, investigations
and governmental and administrative proceedings, some of which are or may be
significant. Adverse judgments or determinations in one or more of these proceedings
could require the Group to change the way it does business or use substantial resources
in adhering to the settlements and could have a material adverse effect on its business,