LeapFrog 2009 Annual Report Download - page 28

Our business is, and will increasingly be, subject to risks associated with conducting business internationally,
including:
• developing successful products that appeal to the international markets;
• difficulties managing and maintaining relationships with vendors, customers, distributors and other
commercial partners;
• political and economic instability, military conflicts and civil unrest;
• greater difficulty in staffing and managing foreign operations;
• transportation delays and interruptions;
• greater difficulty enforcing intellectual property rights and weaker laws protecting such rights;
• complications in complying with laws in varying jurisdictions and changes in governmental policies;
• trade protection measures and import or export licensing requirements;
• currency conversion risks and currency fluctuations, which have recently been more pronounced;
• public health problems, especially in locations where we manufacture or otherwise have operations;
• effectively monitoring compliance by foreign manufacturers with U. S. regulatory requirements for
product safety;
• natural disasters; and
• limitations, including taxes, on the repatriation of earnings.
Currency conversion risks and fluctuations have recently become more pronounced. Sales to our international
customers are transacted primarily in the country’s local currency. If foreign currency weakens compared to the
U.S. dollar, our International segment sales results will suffer.
Any difficulties with our international operations could harm our future sales and operating results.
We are subject to international, federal, state and local laws and regulations that could impose additional
costs or changes on the conduct of our business.
We operate in a highly regulated environment with international, federal, state and local governmental entities
regulating many aspects of our business, including products and the importation of products. Regulations with
which we must comply include accounting standards, taxation requirements (including changes in applicable
income tax rates, new tax laws and revised tax law interpretations), trade restrictions, regulations regarding
financial matters, environmental regulations, advertising directed toward children, safety and other administrative
and regulatory restrictions. Compliance with these and other laws and regulations could impose additional costs
on the conduct of our business. While we take steps that we believe are necessary to comply with these laws and
regulations, there can be no assurance that we have achieved compliance or that we will be in compliance in the
future. Failure to comply with the relevant regulations could result in monetary liabilities and other sanctions,
which could have a negative impact on our business, financial condition and results of operations. In addition,
changes in laws or regulations may lead to increased costs, changes in our effective tax rate, or the interruption of
normal business operations that would negatively impact our financial condition and results of operations.
We are subject to the Consumer Product Safety Act of 1972, as amended by the Consumer Product Safety
Improvement Act, or CPSIA, the Federal Hazardous Substances Act, the Flammable Fabrics Act, regulation by
the Consumer Product Safety Commission, or CPSC, and other similar federal, state and international rules and
regulatory authorities, some of which have conflicting standards and requirements. Our products could be subject
to involuntary recalls and other actions by these authorities. We may also have to write off inventory and allow
18