1248305--3/30/2007--JAFRA_WORLDWIDE_HOLDINGS_LUX

related topics

{debt, indebtedness, cash}

{operation, international, foreign}

{product, market, service}

{product, liability, claim}

{regulation, government, change}

{regulation, change, law}

{personnel, key, retain}

{interest, director, officer}

{condition, economic, financial}

{system, service, information}

{customer, product, revenue}

{property, intellectual, protect}

{capital, credit, financial}

{stock, price, operating}

{acquisition, growth, future}

{product, candidate, development}

{financial, litigation, operation}

International operations may be adversely affected by local conditions. Currency exchange rate fluctuations in Mexico could lower our net sales and net income. We may not be able to enter into hedging or to protect us from fluctuations in currency exchange rates. We may be affected by high levels of inflation in Mexico. The final liquidation and dissolution of subsidiaries in our non-core markets may result in additional costs and diversion of management resources. Our entry into new markets will expose us to new risks and may be unsuccessful resulting in additional costs and management resources. Failure to develop and introduce new products could adversely impact our consultants productivity and revenues, and therefore harm net sales. Failure of new products to gain consultant and market acceptance could negatively affect levels of consultant productivity. Fluctuations in consultant liquidity could negatively impact our revenues and collection cycle and increase our bad debt expense. The loss of key high-level consultants could negatively impact consultant growth and net sales. The regulatory environment in which we operate is evolving, and our ability to sell products through our consultant network may be harmed by regulatory changes, subjective interpretations of laws or an inability to work effectively with national and local government agencies. Government regulation of our products and services may restrict or inhibit introduction of these products in some markets and could harm our ability to generate sales. Laws and regulations may prohibit or severely restrict our direct sales efforts and cause our net sales and profitability to decline. Challenges by private parties to our form of direct marketing could harm our ability to sell products. Our consultants are independent contractors and not employees. If regulatory authorities were to determine, however, on a facts and circumstances basis, that the consultants are legally our employees, we could have significant liability under social benefit laws. Improper consultant actions could harm our reputation or increase costs. We rely on one manufacturing facility to provide products accounting for substantially all of our net sales. If we are unable to protect our intellectual property rights, our ability to compete could be negatively impacted. Governmental authorities may question our intercompany transfer pricing or other payment policies or change their laws in a manner that could increase our effective tax rate or otherwise harm our business. We depend on key personnel and the loss of the services provided by any of our executive officers or other key employees could harm our business and results of operations. Competitive market conditions and the strengths of competitors may harm our ability to sell products or recruit and retain consultants. Product liability claims or recalls could harm the our net sales and profitability. System failures could harm our ability to manufacture our products or fulfill our consultants orders. Our net sales depend on consumer confidence and spending, which may fluctuate from period to period for reasons beyond our control. Our substantial indebtedness could have a material adverse effect on our financial health, ability to obtain financing in the future, and ability to react to changes in our business. We may not be able to generate sufficient cash to service our indebtedness, and may be forced to take other actions to satisfy our obligations under such indebtedness, which may not be successful. Restrictive covenants in our debt instruments may adversely affect financial flexibility. The instruments governing our debt contain cross default provisions that may cause all of the debt issued under such instruments to become immediately due and payable as a result of a default under an unrelated debt instrument. One stockholder controls the direction of our business. The interests of our controlling stockholder may conflict with the interests of other investors. Because we are not a U.S. company, it may be difficult to effect service of process on us or on our non-U.S. resident directors and officers or to enforce any judgment received against us from a U.S. court.

Full 10-K form ▸

1248305--3/30/2007--JAFRA_WORLDWIDE_HOLDINGS_LUX_SARL