LensCrafters 2011 Annual Report Download - page 113

| 37 >MANAGEMENT REPORT
indicate that the carrying amount of an asset may not be recoverable, and the Group
determines whether valuation allowances are needed against other assets, including, but
not limited to, accounts receivable. If the Group determines that impairments or other
events have occurred that lead the Group to believe it will not fully realize these assets,
the Group records 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 the Group believes
its 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, the Group will not incur additional inventory or asset-related charges,
which charges could have a material adverse effect on its results of operations.
r) Leonardo Del Vecchio, the Group chairman and principal stockholder, controls 66.8
percent of Group voting power and is in a position to affect the Group’s ongoing
operations, corporate transactions and any matters submitted to a vote of the Group’s
stockholders, including the election of directors and a change in corporate control
As of January 31, 2012, Mr. Leonardo Del Vecchio, the Chairman of the Group’s Board of
Directors, through the company Delfin S.àr.l., has voting rights over 312,533,339 ordinary
shares, or 66.8 percent of the outstanding ordinary shares. As a result, Mr. Del Vecchio
has the ability to exert significant influence over the corporate affairs of the Group and to
control the outcome of virtually all matters submitted to a vote of its stockholders, including
the election of its directors, the amendment of its 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 the Group’s
other stockholders. In situations involving a conflict of interest between Mr. Del Vecchio
and its 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 the
Group, any of which may be adverse to the interests of the Group’s other stockholders.
s) If the Group procedures designed to comply with Section 404 of the Sarbanes–Oxley
Act of 2002 cause the Group to identify material weaknesses in its internal control over
financial reporting, the trading price of its securities may be adversely impacted
The management of the Group evaluated its internal control over financial reporting, as
required under Section 404 of the US 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 the Group has implemented to comply with these requirements,
the Group may uncover circumstances that it determines, with the assistance of its
independent auditors, to be material weaknesses, or that otherwise result in disclosable
conditions. Any identified material weaknesses in its 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
securities of the Group.