Pottery Barn 2014 Annual Report Download - page 30

intervention by the government and a decrease in the number of insurance carriers. In addition, the carriers with
which we hold our policies may go out of business or be otherwise unable to fulfill their contractual obligations,
or may disagree with our interpretation of the coverage or the amounts owed. In addition, for certain types or
levels of risk, such as risks associated with natural disasters or terrorist attacks, we may determine that we cannot
obtain commercial insurance at acceptable rates, if at all. Therefore, we may choose to forego or limit our
purchase of relevant commercial insurance, choosing instead to self-insure one or more types or levels of risks.
We are primarily self-insured for workers’ compensation, employment practices liability, employee health
benefits, and product and general liability claims, among others. If we suffer a substantial loss that is not covered
by commercial insurance or our self-insurance reserves, the loss and related expenses could harm our business
and operating results. In addition, exposures exist for which no insurance may be available and for which we
have not reserved.
Our inability or failure to protect our intellectual property would have a negative impact on our brands,
reputation and operating results.
We may not be able to adequately protect our intellectual property in the U.S. or in foreign jurisdictions,
particularly as we continue to expand globally. Our trademarks, service marks, copyrights, trade dress rights,
trade secrets, domain names and other intellectual property are valuable assets that are critical to our success. The
unauthorized reproduction, theft or other misappropriation of our intellectual property could diminish the value
of our brands or reputation and cause a decline in our sales. Protection of our intellectual property and
maintenance of distinct branding are particularly important as they distinguish our products and services from
our competitors. In addition, the costs of defending our intellectual property may adversely affect our operating
results.
We may be subject to legal proceedings that could be time consuming, result in costly litigation, require
significant amounts of management time and result in the diversion of significant operational resources.
We are involved in lawsuits, claims and proceedings incident to the ordinary course of our business. Litigation is
inherently unpredictable. Any claims against us, whether meritorious or not, could be time consuming, result in
costly litigation, require significant amounts of management time and result in the diversion of significant
operational resources. There has been a rise in the number of lawsuits against companies like us that gather
information in order to market to consumers online or through the mail and, along with other retailers, we have
been named in lawsuits for gathering zip code information from our customers. We believe that we have
meritorious defenses against these actions, and we will continue to vigorously defend against them. There have
also been a growing number of e-commerce-related patent infringement lawsuits and employment-related
lawsuits in recent years. From time to time, we have been subject to these types of lawsuits. The cost of
defending against all these types of claims against us or the ultimate resolution of such claims, whether by
settlement or adverse court decision, may harm our business and operating results. In addition, the increasingly
regulated business environment may result in a greater number of enforcement actions and private litigation. This
could subject us to increased exposure to stockholder lawsuits.
Our operating results may be harmed by unsuccessful management of our employment, occupancy and other
operating costs, and the operation and growth of our business may be harmed if we are unable to attract
qualified personnel.
To be successful, we need to manage our operating costs and continue to look for opportunities to reduce costs.
We recognize that we may need to increase the number of our employees, especially during holiday selling
seasons, and incur other expenses to support new brands and brand extensions and the growth of our existing
brands, including the opening of new stores. Alternatively, if we are unable to make substantial adjustments to
our cost structure during times of uncertainty, such as an economic downturn, we may incur unnecessary
expenses or we may have inadequate resources to properly run our business, and our business and operating
results may be negatively impacted. From time to time, we may also experience union organizing activity in
currently non-union facilities, including in our stores. Union organizing activity may result in work slowdowns
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