LensCrafters 2013 Annual Report Download - page 28

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products to customers and our profitability may decline due to an increase in our per unit distribution costs in the affected
regions, which may have a material adverse impact on our business, results of operations and financial condition.
If we were to become subject to adverse judgments or determinations in legal proceedings to which we are, or may become, a
party, our future profitability could suffer through a reduction of sales, increased costs or damage to our reputation due to
our failure to adequately communicate the impact of any such proceeding or its outcome to the investor and business
communities.
We are currently a party to certain legal proceedings as described in consolidated financial statements as of
December 31, 2013.” In addition, in the ordinary course of our business, we become 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 us to change the way we do business or use
substantial resources in adhering to the settlements and could have a material adverse effect on our business, including,
among other consequences, by significantly increasing the costs required to operate our business.
Ineffective communications, during or after these proceedings, could amplify the negative effects, if any, of these
proceedings on our reputation and may result in a negative market impact on the price of our securities.
Changes in our tax rates or exposure to additional tax liabilities could affect our future results.
We are subject to taxes in Italy, the United States and numerous other jurisdictions. Our 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 our profitability. We also are regularly subject to the examination of our income tax returns by the U.S.
Internal Revenue Service, the Italian tax authority as well as the governing tax authorities in other countries where we
operate. We routinely assess the likelihood of adverse outcomes resulting from these examinations to determine the adequacy
of our provision for taxes. Currently, some of our companies are under examination by the tax authorities. There can be no
assurance that the outcomes of the current ongoing examinations and possible future examinations will not materially
adversely affect our business, results of operations, financial condition and prospects.
If there is any material failure, inadequacy, interruption or security failure of our information technology systems, whether
owned by us 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 our business.
We rely on information technology systems both managed internally and outsourced to third parties 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 leading to additional costs and possible fines or
penalties, or damage to our reputation, and potentially significant capital investments and other costs could be required to
remediate the problem, which could have a material adverse effect on our results of operations.
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, we will not incur additional inventory or asset-related charges, which charges
could have a material adverse effect on our results of operations.