Rue 21 2012 Annual Report Download - page 23

business and results of operations. Any required changes to our employment practices could result in increased
payroll costs, the loss of employees, reduced sales, low employee morale and harm to our business and results of
operations. It is often difficult for us to plan and prepare for potential changes to applicable laws and future actions
or payments related to such changes could be material to us.
Enacted federal health care legislation could increase our expenses.
We are self-insured with respect to our health care coverage in the U.S. and do not purchase third party
insurance for the health insurance benefits provided to employees with the exception of pre-defined stop loss
coverage, which helps limit the cost of large claims. In March 2010, The Patient Protection and Affordable Care Act
was enacted requiring employers such as us to provide health insurance for all qualifying employees or pay
penalties for not providing coverage. The most significant increases in cost will occur in fiscal year 2014. We are
evaluating the impact the new law will have on us, and although we cannot predict with certainty the financial and
operational impacts the new law will have, we expect to be required to provide health benefits to more employees
than we currently do, which could raise our labor costs. While the majority of these costs will begin in fiscal year
2014, there is no assurance that we will be able to absorb and/or pass through the costs of such legislation in a
manner that will not adversely impact our results or operations.
We may be unable to protect our trademarks or other intellectual property rights.
We are not aware of any claims of infringement upon or challenges to our right to use any of our brand names
or trademarks in the United States. Nevertheless, there can be no assurance that the actions we have taken to
establish and protect our trademarks may not be adequate to prevent imitation of our products by others or to
prevent others from seeking to block sales of our products as a violation of the trademarks or proprietary rights of
others. Also, others may assert rights in, or ownership of, our trademarks and other proprietary rights or claim that
we are infringing on their proprietary rights, and we may not be able to successfully resolve these types of conflicts
to our satisfaction. In addition, upon registration of our marks internationally, the laws of certain foreign countries
may not protect proprietary rights to the same extent as do the laws of the United States.
Although we have begun to register our trademarks in some foreign countries, international protection of our
brand image and the use of these marks could be limited. Other entities may have rights to trademarks that contain
portions of our marks or may have registered similar or competing marks for apparel and accessories in foreign
countries in which our vendors source our merchandise. There may also be other prior registrations in other foreign
countries of which we are not aware. Accordingly, it may be possible for others to enjoin the manufacture, sale or
exportation of our branded goods to the United States. If we were unable to reach a licensing arrangement with these
parties, our vendors may be unable to manufacture our products in those countries. Our inability to register our
trademarks or purchase or license the right to use our trademarks or logos in these jurisdictions could limit our
ability to obtain supplies from less costly markets or penetrate new markets should our business plan change to
include selling our merchandise in those jurisdictions outside the United States.
Concentration of ownership among our existing executive officers, directors and principal stockholders may
prevent new investors from influencing significant corporate decisions.
Our executive officers, directors and our largest stockholder own, in the aggregate, approximately 37.5% of our
outstanding common stock and will own options that will enable them to own, in the aggregate, approximately 39%
of our outstanding common stock on a diluted basis. As a result, these stockholders will be able to exercise
significant influence over all matters requiring stockholder approval, including the election of directors and approval
of significant corporate transactions and will have significant influence over our management and policies. Two of
the eight members of our board of directors are principals of Apax Partners. Funds advised by Apax Partners can
take actions that have the effect of delaying a change in control of us or discouraging others from making tender
offers for our shares, which could prevent stockholders from receiving a premium for their shares. These actions
may be taken even if other stockholders oppose them. The concentration of voting power among funds advised by
Apax Partners may have an adverse effect on the price of our common stock. The interests of these stockholders
may not be consistent with your interests as a stockholder.
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