LensCrafters 2015 Annual Report Download - page 27

Management Report as of December 31, 2015 Page 23 of 35
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.
n) 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 Italian
tax authority, the U.S. Internal Revenue Service 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 tax risks. Currently, some of our companies are under examination by various 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.
o) If there is any material failure, inadequacy, interruption, security failure or breach 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, legal defense and settlement costs, 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.
p) If we record a write-down for inventories that are obsolete or exceed anticipated demand or other assets the net
realizable value of which is below the carrying amount, 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