Seagate 2014 Annual Report Download - page 34

TableofContents
•FluctuationsinCurrencyExchangeRates.PricesforourproductsaredenominatedpredominatelyinU.S.dollars,evenwhensoldtocustomers
thatarelocatedoutsidetheUnitedStates.Anincreaseinthevalueofthedollarcouldincreasetherealcosttoourcustomersofourproductsinthose
marketsoutsideoftheU.S.wherewesellindollars.Thiscouldadverselyimpactoursalesandmarketshareinsuchareasorincreasepressureonus
tolowerourprice,andadverselyimpactourprofitmargins.Aweakeneddollarcouldincreasethecostofexpensessuchaspayroll,utilities,tax,and
marketingexpenses,aswellasoverseascapitalexpenditures.Anyoftheseeventscouldhaveamaterialadverseeffectonourresultsofoperations.
Wemayattempttomanagetheimpactofforeigncurrencyexchangeratechangesby,amongotherthings,enteringintoforeigncurrencyforward
exchangecontracts.However,thesecontractsmaynotcoverourfullexposureandsubjectustocertaincounterpartycreditrisks.See
"Item7A.QuantitativeandQualitativeDisclosuresAboutMarketRisk-ForeignCurrencyExchangeRisk"ofthisreportforadditionalinformation
aboutourforeigncurrencyexchangerisk.
•LongerPaymentCycles.OurcustomersoutsideoftheUnitedStatesareoftenallowedlongertimeperiodsforpaymentthanourU.S.customers.
Thisincreasestheriskofnonpaymentduetothepossibilitythatthefinancialconditionofparticularcustomersmayworsenduringthecourseofthe
paymentperiod.
•Seasonality.Seasonalreductionsinthebusinessactivitiesofourcustomersduringthesummermonths,particularlyinEurope,typicallyresultin
lowerearningsduringthoseperiods.
•LegalandRegulatoryLimitations.Ourinternationaloperationsareaffectedbylimitationsonimports,tariffs,duties,currencyexchangecontrol
regulations,pricecontrols,exportcontrollaws,includingthetradeandeconomicsanctionsadministeredbytheOfficeofForeignAssetsControl,
andotherrestraintsontrade.Inaddition,thegovernmentsofmanycountries,includingChina,Malaysia,NorthernIreland,SingaporeandThailand,
inwhichwehavesignificantoperatingassets,haveexercisedandcontinuetoexercisesignificantinfluenceovermanyaspectsoftheirdomestic
economiesandinternationaltrade.Althoughwehaveimplementedpoliciesandproceduresdesignedtoensurecompliance,therecanbeno
assurancethatouremployees,contractors,oragentswillnotviolatetheseorotherapplicablelawsandregulationstowhichwemaybesubject.
Violationsoftheselawsandregulationscouldleadtosignificantpenalties,includingrestraintsonourexportorimportprivileges,monetaryfines,
criminalproceedingsandregulatoryorotheractionsthatcouldmateriallyadverselyaffectourresultsofoperations.
•PotentialAdverseTaxConsequences.Ourinternationaloperationscreateariskofpotentialadversetaxconsequences,includingimpositionof
withholdingorothertaxesonpaymentsbyoursubsidiaries.Inaddition,ourtaxableincomeinanyjurisdictionisdependentuponacceptanceofour
operationalpracticesandintercompanytransferpricingbylocaltaxauthoritiesasbeingonanarm'slengthbasis.Duetoinconsistenciesin
applicationofthearm'slengthstandardamongtaxingauthorities,aswellasalackofadequatetreaty-basedprotection,transferpricingchallenges
bytaxauthoritiescould,ifsuccessful,substantiallyincreaseourincometaxexpense.Wearesubjecttotaxauditsaroundtheworld,andareunder
auditinvariousjurisdictions,andsuchjurisdictionsmayassessadditionalincometaxagainstus.Althoughwebelieveourtaxpositionsare
reasonable,thefinaldeterminationoftaxauditscouldbemateriallydifferentfromourrecordedincometaxprovisionsandaccruals.Theultimate
resultsofanauditcouldhaveamaterialadverseeffectonouroperatingresultsorcashflowsintheperiodorperiodsforwhichthatdeterminationis
madeandcouldresultinincreasestoouroveralltaxexpenseinsubsequentperiods.Inlightoftheongoingfiscalchallengesmanycountriesare
facing,variouslevelsofgovernmentareincreasinglyfocusedontaxreformandotherlegislativeactiontoincreasetaxrevenue.Inresponse,the
OrganizationforEconomicCooperationandDevelopment'sBaseErosionandProfitShiftingprojectrecommendations,dueoutbytheendof
calendaryear2015,willreshapeinternationaltaxrulesforcountriestoimplement.Thesepotentialchangesintherelevanttaxlawsapplicableto
corporate
31