degree from Temple University School of Law in Philadelphia, Pennsylvania.
`Our executive officers are appointed annually by our Board of Directors and serve at the discretion of the Board. There are no family
`relationships among any ofour executive officers.
`
`Intellectual Property
`We own trademark and service mark rights that we believe are sufficient to conduct our business as currently operated. \Ve own several
`trademarks, including Destination Maternity Corporation®, A Pea in the Pod®, A Pea in the Pod Collection®, Motherhood®, Motherhood
`Maternity®, Destination Maternity“; edamarne® Maternity Spa®, Two Hearts® Maternity, Oh Baby by Motherhood‘‘“ and Motherhood Maternity
`Outlet®. Additionally, we own the marks Secret Fit Belly®, Mimi Matemity® and Maternity Redef1ned®.
`In addition, from time to time, we may pursue patent protection for certain maternity apparel related technologies that we develop. For
`example, in October 2010 and March 2011 we were granted patents for our Secret Fit Belly. The Secret Fit Belly is made of seamless super stretch
`fabric that can form part of nearly any type of bottom (such as jeans, pants, shorts and skirts) to provide a better, more comfortable fit and a
`seamless look. In October 20 l2 we filed a lawsuit against Target Corporation and others for infringement of our proprietary patented Secret Fit
`Belly® technology.
`
`Seasonality
`Our business, like that of many other retailers, is seasonal. Our quarterly net sales have historically been highest in our third fiscal quarter,
`corresponding to the peak Spring selling season. Given the historically higher sales level in our third fiscal quarter and the relatively fixed nature of
`most of our operating expenses and interest expense, we have typically generated a very significant percentage of our full year operating income
`and net income during our third fiscal quarter. Results for any quarter are not necessarily indicative of the results that may be achieved for a full
`fiscal year. Quarterly results 1r1ay fluctuate rnaterially depending upon, among other things, increases or decreases in cornparable sales, the timing
`of new store openings and new leased department openings, net sales and profitability contributed by new stores and leased departments, the
`timing of the fulfillment of purchase orders under our product and license arrangements, adverse weather conditions, shifts in the timing of certain
`holidays and promotions, changes in inventory and production levels and the timing of deliveries of inventory, and changes in our merchandise
`1]]1X.
`
`Securities and Exchange Commission Filings
`Our Securities and Exchange Cornrnission (“SEC”) filings are available free of charge on our website, investordestirratiorrrnaternity.cor11. Our
`annual reports on Fornr 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports are posted on our
`web site as soon as practicable after we furnish such materials to the SEC.
`15
`
`Item 1A.
`
`Risk Factors
`
`You should consider carefully all ofthe information setforth or incorporated by reference in this document and. in particular, the
`following riskfactors associated with our business andf0rward—looking information in this document (see also “Forward—Looking Statements"
`included in Item 7. ll/r'anagement’s' Discussion andAnalys'is ofFinancial Condition and Results ofOperati'ons). The risks’ described below are
`not the only ones we face. Additional risks not presently known to us or that we do not currently consider significant may also hcwe an adverse
`ezfect on us. Ifany ofthe risks below actually occur, our business, results ofoperations, cash_flows orfinancial condition could stiffer.
`
`Our performance may be ajfected by general economic conditions and the continued glubalfinan cial ilifficulties.
`Our performance is subject to worldwide economic conditions and their impact on levels of consumer spending. Over the past four years
`economic conditions have deteriorated significantly followed by a weak recovery and such economic conditions may remain depressed, or be
`subject to fiirther deterioration. Some of the factors that are having an impact on discretionary consumer spending include general economic
`conditions, employment, consumer debt, reductions in net worth based on securities market declines, residential real estate and mortgage markets,
`taxation, healthcare costs, fuel and energy prices, interest rates, credit availability, consumer confidence and other macroeconomic factors.
`The worldwide apparel industry is heavily influenced by general economic cycles. Apparel retailing is a cyclical industry that is heavily
`dependent upon the overall level of consumer spending. Purchases of specialty apparel and related goods tend to be highly correlated with the
`cycles of the levels of disposable income of consumers. As a result, any substantial deterioration in general economic conditions could materially
`
`Source: Destination Maternity Corp, 10—K, 12/14/2012 | Powered by Intelligize
`
`DMC Exhibit 2041_O65
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`and adversely affect our net sales and results of operations. Downturns, or the expectation of a downturn, in general economic conditions could
`materially and adversely affect consumer spending patterns, our sales and our results of operations.
`Consumer purchases of discretionary items generally decline during recessionary periods and other periods where disposable income is
`adversely affected. The downturn in the economy may continue to affect consumer purchases of our merchandise and have an adverse impact on
`our sales, results of operations and cash flow. Because apparel generally is a discretionary purchase, declines in consumer spending may have a
`more negative effect on apparel retailers than on other retailers. We may not be profitable if there is a decline in consumer spending.
`The turmoil in the financial markets in 2008-2009 resulted in extreme volatility in security prices and diminished liquidity and credit
`availability, and there can be no assurance that our liquidity will not be affected by changes in the financial markets and the global economy.
`Tightening of the credit markets and fiiture turmoil in tlie financial markets could also make it more difficult for us to access finids, to refinance our
`existing indebtedness (if necessary), to enter into agreements for new indebtedness, or to obtain funding through the issuance of our securities.
`ln addition, the effect from the 2008-2009 credit crisis had a significant negative impact on businesses around the world, and the potential
`impact of this crisis, or potential future crises, on our suppliers cannot be predicted. The inability of suppliers to access liquidity. or the insolvency
`of suppliers, could lead to their failure to deliver our Inerchaiidise. Worsening economic conditions could also result in difficulties for financial
`institutions (including bank failures) and other parties that we may do business with, which could potentially impair our ability to access financing
`under existing arrangements or to otherwise recover amounts as they become due under our other contractual arrangements. Additionally, either
`as a result of, or independent of the current financial difficulties and economic weakness in the United States, material fluctuations in currency
`exchange rates could have a negative impact on our business.
`
`16
`
`Our comparable sales and quarterly operating results have fluctuated in the past and can be expected to continue tofluctuate in thefuture
`and, as a result, the market price of our common Stock may fluctuate or decline substantially.
`Our comparable sales and quarterly results of operations have fluctuated in the past and can be expected to continue to fiuctuate in the
`future and are affected by a variety of factors. including:
`-
`the opening of new stores, the closing ofexisting stores, and the success of our leased department and licensed relationships;
`-
`the timing of new store openings and leased department and licensed brand business openings;
`-
`the timing of the fulfillment of purchase orders under our product and license arrangements;
`-
`the extent of cannibalization of sales volume of some of our existing retail locations by our new retail locations opened in the same
`geographic markets or by our Internet sales;
`changes in our merchandise mix;
`any repositioning of our brands;
`general economic conditions and, in particular, the retail sales environment;
`calendar shifts, including shifts of holiday or seasonal periods, or shifts in the number of weekend days occurring in a given calendar
`period;
`changes in pregnancy rates and birth rates;
`-
`actions of competitors;
`-
`the level of success and/or actions of anchor tenants where we have stores or leased department and licensed relationships;
`-
`fashion trends; and
`-
`- weather conditions and seasonality.
`If, at any time, our comparable sales or quarterly results of operations decline or do not meet the expectations of investors, the pri ce of our
`eoi11ino11 stock could decline substantially.
`
`-
`-
`-
`-
`
`Our share price may be volatile and could decline substantially.
`The market price of our common stock has been, and is expected to continue to be, volatile, both because of actual and perceived changes in
`our financial results and prospects, and because of general volatility in the stock market. The factors that could cause fluctuations in our share
`
`Source: Destination Maternity Corp, 10—K, 12/14/2012 | Powered by Intelligize
`
`DMC Exhibit 2041_066
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`price may include, among other factors discussed in this section, the following:
`-
`actual or anticipated variations in the financial results and prospects of our business or other companies in the retail business;
`-
`changes in financial estimates by Wall Street research analysts;
`-
`actual or anticipated changes in the Ifnited States economy or the retailing environment;
`-
`changes in the market valuations of other specialty apparel or retail companies;
`-
`announcements by our competitors or us;
`-
`additions and departures of key personnel;
`-
`changes in accounting principles;
`-
`the passage of legislation or other developments affecting us or our industry;
`-
`the trading volume of our common stock in the public market;
`
`17
`
`changes i11 economic conditions;
`-
`financial market conditions;
`-
`- natural disasters, terrorist acts, acts of war or periods of civil unrest; and
`-
`the reali7ation of some or all of the risks described in this section entitled “Risk Factors.”
`
`In addition, the stock markets have experienced significant price and trading volume fluctuations from time to time, and the market prices of
`the equity securities of retailers have been extremely volatile and are sometimes subject to sharp price and trading volume changes. These broad
`markct fluctuations may materially and adversely affect the market price of our common stock.
`
`-
`
`We may not be successful in maintaining and expanding our business and opening new retail locations.
`Any future growth depends significantly on:
`-
`our ability to successfully establish and operate new stores (including Destination Maternity combo stores and superstores) on a
`profitable basis;
`our ability to successfully establish new, and to maintain our current, leased department and licensed relationships, and to operate such
`leased department and licensed relationships on a profitable basis: and
`the success and profitability of our international business, including our ability to successfully establish new; and to maintain o11r current;
`international franchising relationships.
`'lhis growth, if it occurs, will place increased demands on our management, opcrational and administrative resources. These increased
`demands and operating complexities could cause us to operate our business less effectively, which, in turn, could cause a deterioration in our
`financial performance and negatively impact our growth. Any planned growth will also require that we continually monitor and upgrade our
`management information and other svstem s. as well as our distribution infrastructure.
`
`-
`
`Source: Destination Maternity Corp, 10—K, 12/14/2012 | Powered by Intelligize
`
`DMC Exhibit 2041_O67
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`
`
`Our ability to establish and operate new stores and our leased department a11d licensed relationships successfully depends on many factors,
`including, among others, our ability to:
`-
`identify and obtain suitable store locations, including mall locations, the availability of which is outside of our control;
`retain existing, expand existing and establish new leased department and licensed relationships;
`- negotiate favorable lease terms for stores, including desired tenant improvement allowances;
`- negotiate favorable lease terminations for existing store locations in markets where we intend to open new Destination Maternity combo
`stores or superstores;
`source sufficie11t levels of inventory to meet the needs of new stores and our leased department and licensed relationships;
`-
`successfully address competition, merchandising and distribution challenges; and
`-
`hire, train and retain a sufficient number of qualified store personnel.
`-
`The success and profitability of our international business depends on many factors, including, among others:
`-
`our ability to retain our current international franchisees and our ability to identify and reach agreement with new international
`franchisees;
`
`-
`
`-
`-
`
`the ability of our franchisees to identify and obtain suitable store locations, including mall locations, the availability of which is outside of
`their control;
`
`the ability of our franchisees to negotiate favorable lease terms for stores, i11cluding desired tenant improvement allowances;
`our ability to source sufficient levels of inventory to meet the needs of our franchisees’ international operations;
`l8
`
`our ability and the ability of our franchisees to successfully address competition, merchandising and distribution challenges; and
`-
`the ability of our franchisees to hire, train and retain a sufficient number of qualified store personnel.
`-
`There can be no assurance that we will be able to grow our business and achieve our goals. Even if we succeed in establishing new stores,
`further developing o11r leased department and licensed relationships and f11rtl1er expanding our international relationships, we cannot assure that
`these initiatives will achieve planned revenue or profitability levels in the time periods estimated by us, or at all. Ifany of these initiatives fails to
`achieve or is unable to sustain acceptable revenue and profitability levels, we may incur significant costs. For example, i11 connection with our new
`broad—based partnership with Bed Bath & Beyond Inc. and its subsidiary, Buy Buy Baby, Inc., (which we announced in May 2012) we
`discontinued operation of our 124 remaining leased departments in Babics“R”Us in October 2Ul2 and opened leased departments in select buybuy
`BABY stores. Although we are contidentthat the new relationship with Bed Bath & Beyond Inc. and Buy Buy Baby, Inc. will be a profitable one
`for our Company and our stockholders, there is no guarantee of success.
`
`Our business, financial condition and results of operations may be materially and adversely impacted at any time by a significant number of
`competitors.
`We operate in a highly competitive environment characterized by few barriers to entry. We compete against department stores, specialty
`retail chains, discount stores, independent retail stores and catalog and Internet-based retailers. Many of our competitors are larger and have
`substantially greater financial and other resources than us. Further, we do not typically advertise using television and radio media and thus do not
`reach customers through means our competitors may use. Our 1nid— and luxur_v—priced merchandise faces a highly fragmented competitive
`I-wulm-nn.: Hunt in/-Inzhaa I/\/\nll17l'\ncA/J
`ciunrtla unit e«a+ni|A«a no 1\‘A]] no I)
`'|nnn:H1'1I nfnuulfi unit vwnfnormdfxv nnprntinnu V\I\V\A nFnv1ni/-In um I»\AliAxm Ia-um
`
`Source: Destination Maternity Corp, 10—K, 12/14/2012 | Powered by Intelligize
`
`DMC Exhibit 2041_O68
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`l€LllUb\4U.}}U llldl. UIIIIUUCD lU\/¢l.ll_Y UGBUU, b1llglC Ull1llUl£lllU1b, db W511 db Clllilllullzll U1 llll/|l|.l'UlllI. llld.|.Ull1l|._) UlJClU.llUllb, llUllU U1 Wlllhll VVU UUUUVC l1i1\/C
`more than 10 stores nationwide. In the value-priced maternity apparel business, we face competition on a nationwide basis from retailers such as
`Gap, H&M, Old Navy, Target and Wal-Mart. In addition, with our exit from Babies“R”Us in late October 2012 (in connection with our new broad-
`based partnership with Bed Bath & Beyond Inc. and its subsidiary, Buy Buy Baby, Inc.), in November 2012, Toys“R”Us, Inc. announced that it
`had entered into a partnership with Thyme Maternity, a Canada based company, for a collection of maternity apparel and accessories to be
`featured in approximately 150 Babies“R”Us stores in the United States. Substantially all ofthesc competitors also sell maternity apparel on tl1cir
`websites. Our business, financial condition and results of operations may be materially a11d adversely affected by this competition, including tl1e
`potential for increased competition in the future. For example, the maternity apparel business has previously experienced oversupply conditions
`due to increased competition in the maternity apparel business, which resulted in a greater level of industry-wide markdowns and markdowns
`recognized by us on sales fron1 our retail locations. There can be no assurance that these conditions will not occur again or worsen.
`
`Our relationships with third-party retailers may not be successful
`We cannot guarantee S1lCCCSSfL1l results fro111 or tl1e continuation of our leased departmeilt and lice11sed relationships with third-party
`retailers such as Macy’s, Sears, buybuy BABY, Gordmans, Boscov’s and Koh1’s. Under our agreement with Koh1’s, subject to certain notice
`obligations, Kohl’s is not obligated to purchase any maternity apparel fron1 us and we are not obligated to sell any matemity apparel to them. We
`do not control the pricing terms or the timing or degree of the markdowns at Kohl’s. Under our agreements with our leased department partners,
`thosc partners do not make any promises or representations as to the potential amount ofbusiness we can expect from the sale of our product in
`their stores. For example, as we previously announced, we discontinued offering maternity apparel in our 124 remaining Babies“R”Us locations in
`October 2012 in connection with our new broad-based partnership with Bed Bath & Beyond Inc. and its subsidiary, Buy Buy Baby, Inc. The
`success of our leased department and licensed brand businesses is highly dependent on the actions and decisions of the tl1ird—party retailers,
`which are outside of our control. The retailers could limit the merchandise carried, close stores. go out of business or terminate their agreements
`with us. Our failure to properly manage our leased department and licensed brand businesses (including any failure by us in timely delivering
`goods to any tl1ird-party retailer or any failure to respond to tl1e actions of, or changes in, business
`19
`
`conditions at third-party retailers) would have a direct impact 011 the profitability and continuation of these relationships.
`
`Our business depends on sustained demandfor maternity clothing and is sensitive to birth rates, women ’sfashion trends‘, economic conditions
`and consumer spending.
`Our business depends upon sustained demand for maternity clothing. Our future performance will be subj ect to a number of factors beyond
`our control, including demographic changes, fashion trends, economic conditions and consumer spending. If demand for maternity clothing were
`to decline for any reason, such as a decrease in the number of pregnancies, our operating results could be materially and adversely affected. For
`example, according to the United States Census Bureau a11d United States Centers for Disease Control and Prevention, births declined 1.1% in
`calendar 2011 compared to calendar 2010, declined 3.2% i11 calendar 2010 compared to calendar 2009, and declined a total of 8.8% fron1 calendar
`2007 to mid—calendar 2012. If this trend were to conti11ue it could negatively affect our business and results of operations. Additionally, our
`operating results could be materially and adversely affected if certain non-matcmity womcn’s apparel fashions have a more pregnancy-friendly fit.
`For example. in fiscal 2007, we were negatively impacted by the popularity of certain styles in the non-matemity women’s apparel market, such as
`trapeze and baby-doll dresses and tops, which can more readily lit a pregnant woman early in her pregnancy than typical non-maternity fashions.
`Downtums, or the expectation of a downturn, in general economic conditions could materially and adversely affect consumer spending patterns,
`our business, financial condition and results of operations. In addition, the specialty apparel retail business historically has been subject to
`cyclical variations. Consumer purchases of specialty apparel products, including maternity wear, may decline during recessionary periods and at
`other times when disposable income is lower. Declines in consumer spending patterns may have a more negative effect on apparel retailers than
`so111e other retailers. Therefore, we may 11ot be able to maintain our historical sales and earnings, or remain as profitable, if there is a decline in
`consumer spending patterns. A prolonged economic downturn could have a material adverse impact on our business and results of operations.
`
`We may not be successful in. maintaining and expanrling our marketing partnership programs.
`We cannot guarantee successful results from the continuation of, or the expansion of, our marketing partnership programs which utilize our
`opt-in custom er database and various in-store marketing initiatives. The success of our marketing partnership programs is highly dependent on
`the actions and decisions ofthe third-party consumer products companies to whom we provide these services. Should these third-party consumer
`products companies decide to lin1it the services provided by us, go out of business or terminate their agreements with us, our business, financial
`condition and results of operations could be materially and adversely affected. Further, there is no guarantee that we will be able to expand this
`
`Source: Destination Maternity Corp, 10—K, 12/14/2012 | Powered by Intelligize
`
`DMC Exhibit 2041_O69
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`part of our business through agreements with new third parties. In addition, our ability to provide the services is dependent on our successful
`collection of opt-in customer data as well as applicable law relating to the collection and transfer of the personally identifiable information of our
`custoniers. A failure on our part to collect adequate aniounts of customer data or any change in state, local or federal law which further restricts
`our ability to collect this information could cause us to terminate or limit the services we can provide to the third-party consumer products
`companies and would ultimately adversely affect our revenue from these relationships. Further, although we believe there may be an opportunity
`to more actively market our full customer database to a much broader range of consumer products and services companies that market to families
`with children, we cannot guarantee that these efforts will be successful.
`
`We require a significant amount of cash to pay quarterly dividends‘ as well as ta fund our operatians andfuture growth.
`Our ability to pay quarterly dividends, as well as to fund our operations and future growth, depends upon our ability to generate cash. Our
`success in generating cash depends upon the results of our operations and the amount of cash we use in investing activities, as well as upon
`general economic, financial, competitive and other factors beyond our control.
`20
`
`An inability to generate sufficient cash could have important consequences. For example, it could:
`-
`increase our vulnerability to general adverse economic and industry conditions;
`-
`limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
`-
`place us at a competitive disadvantage compared to our competitors;
`-
`limit our ability to borrow money;
`- make it more ditlicult for us to open new stores or improve or expand existing stores;
`-
`restrict our ability to pay dividends or make distributions to our stockholders;
`-
`require us to incur significant additional indebtedness; and
`- make it more difficult for us to pursue strategic acquisitions, alliances and partnerships.
`
`Our variable rate imlebterlness subjects as to interest rate risk, which could cause aur debt service obligations to increase significantly.
`Any borrowings under our new revolving credit facility, which could significantly increase in the future, would bear interest at a variable
`rate. We have exposure for the variable interest rate borrowings under our revolving credit facility. As a result, an increase in interest rates could
`result in a substantial increase in interest expense, especially if our borrowings under our revolving credit facility increase.
`
`We are heavily dependent on our management informatian systems and our ability ta maintain and upgrade these systemsfrom time to time.
`The efficient operation of our business is heavily dependent on our internally developed management information systems (“MIS”). In
`particular, we rely on point-of-sale terminals, which provide infoiination to our customized merchandise analysis and planning system used to track
`sales and inventory, and We rely on our Internet websites through which we sell merchandise to our customers. The merchandise analysis and
`planning system helps integrate our design, manufacturing, distribution and financial functions, and also provides daily financial and
`merchandising information. Although our software programs and data are backed up and securely stored off-site, our servers and computer
`systems are located at our headquarters in Philadelphia, Pennsylvania. These systems and our operations are vulnerable to damage or interruption
`from:
`
`-
`
`lire, Hood and other natural disasters;
`
`Source: Destination Maternity Corp, 10—K, 12/14/2012 | Powered by Intelligize
`
`DMC Exhibit 2041_070
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`-
`
`power loss, computer systems failures, Internet and telecommunications or data network failure, operator negligence, improper operation
`by or supervision of employees, physical and electronic loss of data or security breaches, misappropriation and similar events; and
`computer viruses.
`-
`Any disruption in the operation of our l\/IIS. the loss of employees knowledgeable about such systems or our failure to continue to
`effectively modify such systems could interrupt our operations or interfere with our ability to monitor inventory, which could result in reduced net
`sales and affect our operations and financial performance. In addition, any interruption in the operation of our Internet websites could cause us to
`lose sales due to the inability of customers to purchase merchandise from us through our websites during such interruption.
`We also need to ensure that our systems are consistently adequate to handle our anticipated business growth and are upgraded as
`necessary to meet our needs. The cost of any such system upgrades or enhancements could be significant. As a result, our business, financial
`condition and results ofoperations could be materially and adversely affected ifour servers and systems were inoperable or inaccessible.
`l4ro1n time to time, we improve and upgrade our MIS and the functionality of our Internet websites. If we are unable to maintain and upgrade
`our systems or Internet websites. or to integrate new and updated systems or changes to our Internet websites in an efficient and timely manner,
`o11r business, financial condition and results of operations could be materially and adversely affected.
`21
`
`A cybersecurity incident could have a negative impact.
`A eyber attack may bypass the security for our MIS causing an MIS security breach and leading to a material disruption of our MIS and/or
`the loss of business information and/or Internet sales. Such a cyber attack could result in any of the following:
`tlrefi, destruction, loss, misappropriation or release of confidential data or intellectual property;
`operational or business delays resulting from the disruption of MIS and subsequent clean—up and mitigation activities;
`- negative publicity resulting in reputation or brand damage with our customers, partners or industry peers; and
`loss of sales generated through our Internet websites through which we sell merchandise to customers, to the extent these web sites are
`affected by a cyber attack.
`As a result, our business, financial condition and results of operations could be materially’ and adversely affected.
`
`As an apparel retailer, we rely on numerous thirdparties in the supply chain to produce and deliver the prnducts that we sell, and our business
`may be negatively impacted by disruptions in the supply chain.
`If we lose the services of one or more of our significant suppliers or one or more of them fail to meet our product needs, we may be unable to
`obtain replacement merchandise in a timely manner. If our existing suppliers cannot meet our increased needs and we cannot locate alternative
`supply sources, we may be unable to obtain sufficient quantities of the most popular items at attractive prices, which could negatively impact our
`sales and results of operations. We obtain apparel and other merchandise from foreign sources, both purchased directly in foreign markets and
`indirectly through domestic vendors with foreign sources. To the extent that any of our vendors are located overseas or rely on overseas sources
`for a large portion of their products, any event causing a disruption of imports, including the imposition of import restrictions, could harm our
`ability to source product. This disruption could materially limit the merchandise that we would have available for sale and reduce our sales and
`earnings. The flow of merchandise from our vendors could also be materially and adversely affected by financial or political instability, or war, in or
`affecting any of the countries in which the goods we purchase are manufactured or through which they flow. Trade restrictions in the form of
`tariffs or quotas, embargocs and customs restrictions that are applicable to the products that we sell also could affect the import of those products
`and could increase the cost and reduce the supply of products available to 11s. Any material increase ir1 tariff levels, or any material decrease ir1
`quota levels or available quota allocation, could negatively impact our business. Further, changes in tariffs or quotas for merchandise imported
`from individual foreign countries could lead us to shift our sources of supply among various countries. Any such shift we undertake in the future
`could result in a disruption of our sources of supply and/or an increase in product costs. and lead to a reduction in our sales and earnings. Supply
`chain security initiatives undertaken by the United States government that impede the normal flow of product could also negatively impact our
`
`Source: Destination Maternity Corp, 10—K, 12/14/2012 | Powered by Intelligize
`
`DMC Exhibit 2041_O71
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`business. In addition, decreases in the value of the United States dollar against foreign currencies could increase the cost of products that we
`purchase from overseas vendors.
`We also face a variety of other risks generally associated with relying on vendors that do business in foreign markets and import
`merchandise from abroad, such as:
`-
`political instability or the threat of terrorism, particularly in countries where our vendors source merchandise;
`-
`enhanced security measures at United States and foreign ports, which could delay delivery of imports;
`-
`imposition of new or supplemental duties, taxes and other charges on imports;
`-
`delayed receipt or non-delivery of goods due to the failure of foreign-source suppliers to comply with applicable import regulations;
`22
`
`-
`
`-
`
`delayed receipt or non-delivery of goods due to organized labor strikes or unexpected or significant port congestion at United States
`ports", a11d
`local business practice and political issues. including issues relating to compliance wi