LensCrafters 2015 Annual Report Download - page 26

Management Report as of December 31, 2015 Page 22 of 35
to significantly increase the resources we devote to protecting our rights. From time to time, third parties may assert patent,
copyright, trademark or similar rights against intellectual property that is important to our business. The resolution or
compromise of any litigation or other legal process to enforce such alleged third party rights, regardless of its merit or
resolution, could be costly and divert the efforts and attention of our management. We may not prevail in any such litigation
or other legal process or we may compromise or settle such claims because of the complex technical issues and inherent
uncertainties in intellectual property disputes and the significant expense in defending such claims. An adverse
determination in any dispute involving our proprietary rights could, among other things, (i) require us to coexist in the
market with competitors utilizing the same or similar intellectual property, (ii) require us to grant licenses to, or obtain
licenses from, third parties, (iii) prevent us from manufacturing or selling our products, (iv) require us to discontinue the use
of a particular patent, trademark, copyright or trade secret or (v) subject us to substantial liability. Any of these possibilities
could have a material adverse effect on our business by reducing our future sales or causing us to incur significant costs to
defend our rights.
k) If we are unable to maintain our current operating relationship with host stores including of our retail licensed
brands and other host relationships, we could suffer a loss in sales and possible impairment of certain
intangible assets.
Our sales depend in part on our relationships with the host stores that allow us to operate our retail licensed brands ,
including Sears Optical and Target Optica land other host relationships, including Macy’s. Our leases and licenses with
Sears Optical are terminable upon short notice. If our relationship with Sears Optical, Target Optical or Macy’s were to end,
we would suffer a loss of sales and the possible impairment of certain intangible assets. This could have a material adverse
effect on our business, results of operations, financial condition and prospects.
l) If we fail to maintain an efficient distribution and production network or if there is a disruption to our critical
manufacturing plants or distribution network in highly competitive markets, our business, results of operations
and financial condition could suffer.
The mid- and premium-price categories of the prescription frame and sunglasses markets in which we operate are highly
competitive. We believe that, in addition to successfully introducing new products, responding to changes in the market
environment and maintaining superior production capabilities, our ability to remain competitive is highly dependent on our
success in maintaining an efficient distribution network. If we are unable to maintain an efficient and resilient distribution
and production network or a significant disruption thereto should occur, our sales may decline due to the inability to timely
deliver 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.
m) 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. 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