Staples 2012 Annual Report Download - page 83

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access to, or misuse of confidential or personal information could disrupt our operations, damage our reputation, and expose us
to claims from customers, financial institutions, regulators, payment card associations, employees and other persons, any of which
could have an adverse effect on our business, financial condition and results of operations.
Our business may be adversely affected by the actions of and risks associated with third-party vendors and service
providers.
The products we sell are sourced from a wide variety of third-party vendors. In general, we do not have long-term contracts
with these vendors committing them to provide products to us on acceptable terms. For example, we derive benefits from vendor
allowances and promotional incentives which may not be offered in the future. We also cannot control the supply, design, function
or cost of many of the products that we offer for sale and are dependent on the availability and pricing of key products, including
paper, ink, toner and technology. Some of the products we offer are supplied to us on an exclusive basis and may be difficult to
replace in a timely manner. Additionally, we may not be able to source products that we want to offer for sale on acceptable terms,
or at all. Disruptions in the availability of raw materials used in the production of these products, or quality issues that cause us
to initiate voluntary or mandatory recalls for proprietary products we sell, may result in customer dissatisfaction, damage our
reputation and adversely affect our sales.
Global sourcing of many of the products we sell is an important factor in our financial performance. Our ability to find
qualified vendors and access products in a timely and efficient manner is a significant challenge, especially with respect to goods
sourced outside the United States. Political instability, the financial instability of suppliers, trade restrictions, tariffs, foreign
currency exchange rates, transport capacity and costs, inflation and other factors relating to foreign trade are beyond our control.
We also rely upon many independent service providers for services that are important to many aspects of our business. If our
vendors or service providers fail or are unable to perform as expected and we are unable to replace them quickly, our business
could be harmed at least temporarily until we are able to do so and potentially, in some cases, permanently. These and other issues
affecting our vendors and service providers could adversely affect our reputation, business and financial performance.
Various legal proceedings may adversely affect our business and financial performance.
We are involved in various private legal proceedings, which include consumer, employment, intellectual property,
commercial, tort and other litigation. As our workforce expands, we are subject to potentially increasing challenges by private
litigants regarding compliance with local, state and national labor regulations, whether meritorious or not. In addition, companies
have increasingly been subject to employment related class action litigation, and we have experienced an increase in “wage and
hour” class action lawsuits. We expect that these trends will continue to affect us. As our operations grow, we are also subject to
claims that the technology we use or the products we sell infringe intellectual property rights of third parties. Such claims, whether
meritorious or not, involve significant managerial resources and can become costly. Generally, we have indemnification protections
in our agreements which our vendors or licensors often have honored; however, there are no assurances that such vendors or
licensors will continue to do so in the future. We estimate exposure and establish reserves for our estimated significant liabilities,
however, litigation is inherently unpredictable and the outcome of legal proceedings and other contingencies could be unexpected
and require us to pay substantial amounts of money or take actions that adversely affect our operations. In addition, defending
against these claims may involve significant time and expense. Given the large size of our operations and workforce, the visibility
of our brand and our position as an industry leader, we may regularly be involved in legal proceedings that could adversely affect
our business and financial performance.
Failure to comply with laws, rules and regulations could negatively affect our business operations and financial
performance.
Our business is subject to federal, state, local and international laws, rules and regulations, such as state and local wage
and hour laws, the U.S. Foreign Corrupt Practices Act, the False Claims Act, the Employee Retirement Income Security Act
(“ERISA”), securities laws, import and export laws (including customs regulations), unclaimed property laws, and many others.
The complexity of the regulatory environment in which we operate and the related cost of compliance are both increasing due to
legal and regulatory requirements, increased enforcement and our ongoing expansion into new markets and new channels. In
addition, as a result of operating in multiple countries, we must comply with multiple foreign laws and regulations that may differ
substantially from country to country and may conflict with corresponding U.S. laws and regulations. We may also be subject to
investigations or audits by governmental authorities and regulatory agencies, which can occur in the ordinary course of business
or which can result from increased scrutiny from a particular agency towards an industry, country or practice. If we fail to comply
with laws, rules and regulations or the manner in which they are interpreted or applied, we may be subject to government enforcement
action, class action litigation or other litigation, damage to our reputation, civil and criminal liability, damages, fines and penalties,
and increased cost of regulatory compliance, any of which could adversely affect our results of operations and financial performance.