LensCrafters 2012 Annual Report Download - page 124

ANNUAL REPORT 2012> 38 |
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.
r) Leonardo Del Vecchio, our chairman and principal stockholder, controls 61.64 percent
of our voting power and is in a position to affect our ongoing operations, corporate
transactions and any matters submitted to a vote of our stockholders, including the
election of directors and a change in corporate control
As of December 31, 2012, Mr. Leonardo Del Vecchio, the Chairman of our Board of
Directors, through the company Delfin S.àr.l., has voting rights over 292,035,339 Ordinary
Shares, or 61.71 percent of the outstanding Ordinary Shares. As a result, Mr. Del Vecchio
has the ability to exert significant influence over our corporate affairs and to control the
outcome 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.
s) 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
Our annual report on Form 20-F includes a report from our management relating to its
evaluation of our internal control over financial reporting, as required under Section 404