On occasion, products offered by the Company have been subject to voluntary recall; however,
no such recall has had a material adverse effect on the Company.
The United States and the other countries in which the Company's products are manufactured
may, from time to time, impose new or adjust existing quotas, duties, tariffs or other restrictions,
with the result that the Company's ability to continue to import merchandise at required levels
could be adversely affected. Although the Company attempts to identify secondary sources for
its merchandise, the Company cannot now predict the likelihood of any such events occurring
or the effect on its business of any such event.
In the past, various states had taken action to require mail order retailers to collect sales tax from
residents in their states, even if the only contact with such states is the mailing of catalogs into
the states. On May 26, 1992, the Supreme Court ruled that state governments could not require
out of state mail order companies to collect and remit sales and use taxes without Congressional
authorization. Since that time, bills have periodically been introduced in Congress, which would
allow states to impose sales tax collection responsibility upon mail order companies. No bills
have been enacted into law. Similarly, Congress is currently studying Internet taxation issues,
but to date has not enacted any bills which would require companies to collect sales tax on
Internet transactions in states where they do not have a physical presence.
Although management is unable to predict the likelihood of Congress passing sales tax
legislation in the future, the Company does not expect that the collection of sales tax will have a
material effect on its results of operations in fiscal 2003.
Trademarks and Copyrights
The Company has federally registered service marks and/or logos for "Lillian Vernon" and many
of its catalog titles. In the opinion of the management of the Company, the service mark "Lillian
Vernon" is of significant value because of its market recognition as a result of many years of use
and the large quantity of catalogs circulated.
The Company also possesses numerous copyrights and/or trademarks on its products, none of
which individually is material to the Company.
Employees
As of February 23, 2002, the Company and its subsidiaries employed approximately 1,400
employees. During the peak holiday season, the Company utilizes approximately 5,300 people
including seasonal employees working in the telephone order, order processing and distribution
areas. Employees are not covered by collective bargaining agreements. The Company considers
its employee relations to be good.
Competition
The retail business in general, and mail order in particular, is highly competitive. The Company
competes primarily with other mail order catalogs, as well as Internet websites and retail stores,
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