Adobe 2010 Annual Report Download - page 46

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• tax laws (including U.S. taxes on foreign subsidiaries);
• increased financial accounting and reporting burdens and complexities;
• unexpected changes in, or impositions of, legislative or regulatory requirements;
• failure of laws to protect our intellectual property rights adequately;
• inadequate local infrastructure and difficulties in managing and staffing international operations;
• delays resulting from difficulty in obtaining export licenses for certain technology, tariffs, quotas and other trade
barriers and restrictions;
• transportation delays;
• operating in locations with a higher incidence of corruption and fraudulent business practices; and
• other factors beyond our control, including terrorism, war, natural disasters and pandemics.
If sales to any of our customers outside of the Americas are delayed or cancelled because of any of the above factors, our
revenue may be negatively impacted.
In addition, approximately 45% of our employees are located outside the U.S. This means we have exposure to changes
in foreign laws governing our relationships with our employees, including wage and hour laws and regulations, fair labor
standards, unemployment tax rates, workers’ compensation rates, citizenship requirements and payroll and other taxes, which
likely would have a direct impact on our operating costs. We also intend to continue expansion of our international operations
and international sales and marketing activities. Expansion in international markets has required, and will continue to require,
significant management attention and resources. We may be unable to scale our infrastructure effectively, or as quickly as our
competitors, in these markets and our revenues may not increase to offset these expected increases in costs and operating
expenses, which would cause our results to suffer.
Moreover, as a global company, we are subject to varied and complex laws, regulations and customs domestically and
internationally. These laws and regulations relate to a number of aspects of our business, including trade protection, import
and export control, data and transaction processing security, records management, gift policies, employment and labor
relations laws, securities regulations and other regulatory requirements affecting trade and investment. The application of
these laws and regulations to our business is often unclear and may at times conflict. Compliance with these laws and
regulations may involve significant costs or require changes in our business practices that result in reduced revenue and
profitability. Non-compliance could also result in fines, damages, criminal sanctions against us, our officers, or our
employees, prohibitions on the conduct of our business, and damage to our reputation. We incur additional legal compliance
costs associated with our global operations and could become subject to legal penalties in foreign countries if we do not
comply with local laws and regulations, which may be substantially different from those in the U.S. In many foreign
countries, particularly in those with developing economies, it is common to engage in business practices that are prohibited
by U.S. regulations applicable to us such as the Foreign Corrupt Practices Act. Although we implement policies and
procedures designed to ensure compliance with these laws, there can be no assurance that all of our employees, contractors
and agents, as well as those companies to which we outsource certain of our business operations, including those based in or
from countries where practices which violate such U.S. laws may be customary, will not take actions in violation of our
internal policies. Any such violation, even if prohibited by our internal policies, could have an adverse effect on our business.
We may incur losses associated with currency fluctuations and may not be able to effectively hedge our exposure.
Our operating results are subject to fluctuations in foreign currency exchange rates. We attempt to mitigate a portion of
these risks through foreign currency hedging, based on our judgment of the appropriate trade-offs among risk, opportunity
and expense. We have established a hedging program to partially hedge our exposure to foreign currency exchange rate
fluctuations for various currencies. We regularly review our hedging program and make adjustments as necessary based on
the judgment factors discussed above. Our hedging activities may not offset more than a portion of the adverse financial
impact resulting from unfavorable movement in foreign currency exchange rates, which could adversely affect our financial
condition or results of operations.