Sally Beauty Supply 2007 Annual Report Download - page 26

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over which neither they nor we have control. In addition, our operating results depend to some extent on the orderly operation of our receiving and distribution
process, which depends on manufacturers' adherence to shipping schedules and our effective management of our distribution facilities and capacity.
If a material interruption of supply occurs, or a significant supplier ceases to supply us or materially decreases its supply to us, we may not be able to acquire
products with similar quality and consumer brand name recognition as the products we currently sell, or acquire such products in sufficient quantities to meet our
customers' demands or on favorable terms to our business, any of which could adversely impact our business, financial condition and results of operations.
We do not control the production process for the brand name and exclusive label products we sell. In many cases, we rely on representations of manufacturers
and fillers about the products we purchase for resale regarding whether such products have been manufactured in accordance with applicable governmental
regulations. We may not be able to identify a defect in a product we purchase from a manufacturer or filler before we offer such product for resale, which could
result in fines or other actions by government regulators, product liability claims, product recalls, harm to our credibility, impairment of customer relationships or
a decrease in the market acceptance of brand names, any of which could adversely affect our business, financial condition and results of operations.
If products sold by us are found to be defective in labeling or content, our credibility and that of the brands we sell may be harmed, market acceptance of our
products may decrease and we may be exposed to liability in excess of our products liability insurance coverage and manufacturer indemnities.
Our sale of certain products exposes us to potential product liability claims, recalls or other regulatory or enforcement actions initiated by federal, state or
foreign regulatory authorities or through private causes of action. Such claims, recalls or actions could be based on allegations that, among other things, the
products sold by us are misbranded, contain contaminants, provide inadequate instructions regarding their use or misuse, or include inadequate warnings
concerning flammability or interactions with other substances. Claims against us could also arise as a result of the misuse by purchasers of such products or as a
result of their use in a manner different than the intended use. We may be required to pay for losses or injuries actually or allegedly caused by the products we
sell and to recall any product we sell that is alleged to be or is found to be defective.
Any actual defects or allegations of defects in products sold by us could result in adverse publicity and harm our credibility, which could adversely affect our
business, financial condition and results of operations. Although we may have indemnification rights against the manufacturers of many of the products we
distribute and rights as an "additional insured" under the manufacturer's insurance policies, it is not certain that any individual manufacturer or insurer will be
financially solvent and capable of making payment to any party suffering loss or injury caused by products sold by us. Further, some types of actions and
penalties, including many actions or penalties imposed by governmental agencies and punitive damages awards, may not be remediable through reliance on
indemnity agreements or insurance. Furthermore, potential product liability claims may exceed the amount of indemnity or insurance coverage or be excluded
under the terms of an indemnity agreement or insurance policy. If we are forced to pay to satisfy such claims, it could have an adverse effect on our business,
financial condition and results of operations.
We could be adversely affected if we do not comply with laws and regulations or if we become subject to additional or more stringent laws and regulations.
We are subject to a number of U.S. federal, state and local laws and regulations, as well as the laws and regulations applicable in each other market in which we
do business. These laws and regulations govern the composition, packaging, labeling and safety of the products we sell, the methods we use to sell these products
and the methods we use to import these products. Non-compliance with applicable laws and regulations of governmental authorities, including the FDA and
similar authorities in other jurisdictions,
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Source: Sally Beauty Holding, 10-K, November 29, 2007