Sally Beauty Supply 2011 Annual Report Download - page 37

economic climate could also adversely affect our vendors. The occurrence of any of these events could
have a material adverse effect on our business, financial condition and results of operations.
We are not certain that our ongoing cost control plans will continue to be successful.
Our business strategy substantially depends on continuing to control or reduce operating expenses. In
furtherance of this strategy, we have engaged in ongoing activities to reduce or control costs, some of
which are complicated and require us to expend significant resources to implement. We cannot assure you
that our efforts will result in the increased profitability, cost savings or other benefits that we expect, which
could have a material adverse effect on our business, financial condition and results of operations.
If we are unable to protect our intellectual property rights, specifically our trademarks and service marks, our ability
to compete could be negatively impacted.
The success of our business depends to a certain extent upon the value associated with our intellectual
property rights. We own certain trademark and service mark rights used in connection with our business
including, but not limited to, ‘‘Sally,’’ ‘‘Sally Beauty,’’ ‘‘Sally Beauty Supply,’’ ‘‘Sally Beauty Club Card,’’
‘‘BSG,’’ ‘‘CosmoProf,’’ ‘‘Proclub,’’ ‘‘Armstrong McCall,’’ ‘‘ion,’’ ‘‘Beyond the Zone’’ and ‘‘Salon Services.’’
We protect our intellectual property rights through a variety of methods, including, but not limited to,
applying for and obtaining trademark protection in the U.S., Canada and other countries throughout the
world in which our business operates. We also rely on trade secret laws, in addition to confidentiality
agreements with vendors, employees, consultants and others who have access to our proprietary
information. While we intend to vigorously protect our trademarks against infringement, we may not be
successful. In addition, the laws of certain foreign countries may not protect our intellectual property rights
to the same extent as the laws of the U.S. The costs required to protect our intellectual property rights and
trademarks are expected to continue to be substantial.
Our ability to conduct business in international marketplaces may be affected by legal, regulatory and economic
risks.
Our ability to capitalize on growth in new international marketplaces and to grow or maintain our current
level of operations in our existing international marketplaces is subject to risks associated with our
international operations. These risks include: unexpected changes in regulatory requirements, trade
barriers to some international marketplaces, economic and foreign currency fluctuations, potential
difficulties in enforcing contracts, increasing levels of violence or terrorism, an inability to properly protect
assets (including intellectual property), an inability to collect receivables, potential tax liabilities associated
with repatriating funds from foreign operations and difficulties and costs of staffing, managing and
accounting for foreign operations.
We may be adversely affected by any disruption in our information technology systems.
Our operations are dependent upon our information technology systems, which encompass all of our
major business functions. We rely upon such information technology systems to manage and replenish
inventory, to fill and ship customer orders on a timely basis, to coordinate our sales activities across all of
our products and services and to coordinate our administrative activities. A substantial disruption in our
information technology systems for any prolonged time period (arising from, for example, system capacity
limits from unexpected increases in our volume of business, outages or delays in our service) could result in
delays in receiving inventory and supplies or filling customer orders and adversely affect our customer
service and relationships. Our systems might be damaged or interrupted by natural or man-made events
(caused by us, by our service providers or others) or by computer viruses, physical or electronic break-ins
and similar disruptions affecting the internet. Such delays, problems or costs may have a material adverse
effect on our business, financial condition and results of operations.
As our operations grow in both size and scope, we continuously need to improve and upgrade our systems
and infrastructure while maintaining their reliability and integrity. The expansion of our systems and
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