Etsy 2015 Annual Report Download - page 32

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laws, changes in the mix of revenue among different jurisdictions, changes to accounting rules and changes to our ownership or capital structure.
Fluctuations in our tax obligations and effective tax rate could adversely affect our business.
In January 2015, we implemented a revised corporate structure to more closely align our structure with our global operations and future expansion plans
outside of the United States. Our new corporate structure changed how we use our intellectual property and implemented certain intercompany arrangements.
We believe this may result in a reduction in our overall effective tax rate over the long term and other operational efficiencies; however, the tax laws of the
jurisdictions in which we operate are subject to interpretation, and their application may depend on our ability to operate our business in a manner consistent
with our corporate structure. Moreover, these tax laws are subject to change. Tax authorities may disagree with our position as to the tax treatment of our
transfer of intangible assets or determine that the manner in which we operate our business does not achieve the intended tax consequences. If our new
corporate structure does not achieve our expectations for any of these or other reasons, we may be subject to a higher overall effective tax rate and our
business may be adversely affected.
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We do not currently have any obligations outstanding under our credit facility. However, our credit facility requires us to comply with various covenants that
limit our ability to take actions such as:
• disposing of assets;
• completing mergers or acquisitions;
• incurring additional indebtedness;
• encumbering our properties or assets;
• paying dividends or making other distributions;
• making specified investments; and
• engaging in transactions with our affiliates.
These restrictions could limit our ability to pursue our business strategies. If we default under our credit facility and if the default is not cured or waived, the
lenders could terminate their commitments to lend to us and cause any amounts outstanding to be payable immediately. Such a default could also result in
cross defaults under other debt instruments. Moreover, any such default would limit our ability to obtain additional financing, which may have an adverse
effect on our cash flow and liquidity.
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We believe that our existing cash and cash equivalents and short-term investments, together with cash generated from operations and available borrowing
capacity under our credit facility, will be enough to meet our anticipated cash needs for at least the next 12 months. However, we may require additional cash
resources due to changed business conditions or other developments, such as acquisitions or investments we may decide to pursue. We may seek to borrow
funds under our credit facility or sell additional equity or debt securities. The sale of additional equity securities could result in dilution to our existing
stockholders. Borrowing funds would result in increased debt service obligations and could result in additional operating and financial covenants that would
limit our operations. It is also possible that financing may not be available to us in amounts or on terms acceptable to us, if at all.
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Our insurance policies cover a number of risks and potential liabilities, such as general liability, property coverage, errors and omissions liability,
employment liability, business interruptions, data breaches, crime, product liability and directors’ and officers’ liability. For certain types of business risk, we
may not be able to, or may choose not to, acquire insurance. In addition, we may not obtain enough insurance to adequately mitigate the risks we face or we
may have to pay high premiums and/or deductibles for the coverage we do obtain. Additionally, if any of our insurers becomes insolvent, it would be unable
to pay any claims that we make.
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