Adobe 2012 Annual Report Download - page 46

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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 if we fail to comply with local laws and regulations in U.S. jurisdictions or in foreign
countries, which laws and regulations 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 that 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.
As a global business that generates approximately 50% of our total revenue from sales to customers outside of the Americas,
we are subject to a number of risks, including:
• foreign currency fluctuations;
• changes in government preferences for software procurement;
• international economic, political and labor conditions;
• 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;
• the imposition of governmental economic sanctions on countries in which we do business or where we plan to expand
our business;
• 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 canceled because of any of the above factors, our
revenue may be negatively impacted.
In addition, approximately 48% of our employees are located outside the U.S. Accordingly, we are exposed to changes in
laws governing our employee relationships in various U.S. and foreign jurisdictions, including laws and regulations regarding
wage and hour requirements, fair labor standards, employee data privacy, 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.
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. If the foreign currency hedging markets are negatively affected by clearing and trade execution regulations
imposed by the Dodd-Frank Wall Street Reform and Consumer Protection Act, the cost of hedging our foreign exchange exposure
could increase.
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