LensCrafters 2011 Annual Report Download - page 112

ANNUAL REPORT 2011> 36 |
including, among other consequences, by significantly increasing the costs required to
operate its business.
Ineffective communications during or after these proceedings could amplify the negative
effects, if any, of these proceedings on its reputation and may result in a negative market
reaction in the trading of its securities.
o) Changes in the Group tax rates or exposure to additional tax liabilities could affect
its future results
The Group is subject to taxes in Italy, the United States and numerous other foreign
jurisdictions. Its future effective tax rates could be affected by changes in the mix of
earnings in countries with differing statutory tax rates, changes in the valuation of deferred
tax assets and liabilities, or changes in tax laws or their interpretation. Any of these changes
could have a material adverse effect on the Group’s profitability. The Group also is regularly
subject to the examination of its income tax returns by the US Internal Revenue Service,
the Italian tax authority as well as the governing tax authorities in other countries where it
operates. The Group routinely assesses the likelihood of adverse outcomes resulting from
these examinations to determine the adequacy of its provision for taxes. Currently, some of
the Group’s companies are under examination by the tax authorities in the United States,
Italy and other jurisdictions. There can be no assurance that the outcomes of the current
ongoing examinations and possible future examinations will not materially adversely affect
its business, results of operations, financial condition and prospects.
p) If there is a material failure, inadequacy, interruption or security failure of its information
technology systems, whether owned by the Group or outsourced or managed by third
parties, this may result in remediation costs, reduced sales due to an inability to properly
process information, and increased costs of operating business of the Group
The Group relies on information technology systems both managed and outsourced to third
parties, across its operations, including for management of its supply chain, point-of-sale
processing in its stores and various other processes and transactions. The Group’s ability to
effectively manage its business and coordinate the production, distribution and sale of its
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 its operations, unintentional
disclosure of customer or other confidential information of the Company, or damage to its
reputation, and potentially significant capital investments could be required to remediate the
problem, which could have a material adverse effect on the Group’s results of operations.
q) If the Group records 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 its results of operations
The Group records a write-down for product and component inventories that have
become obsolete or exceed anticipated demand or net realizable value. The Group
reviews its long-lived assets for impairment whenever events or changed circumstances