LeapFrog 2013 Annual Report Download - page 23
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Please find page 23 of the 2013 LeapFrog annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.Our efforts to increase sales for our products outside the U.S. may not be successful and may not achieve
higher sales or gross margins or contribute to profitability. Expansion plans will require significant
management attention and resources and may be unsuccessful. We may have to compete with established local
or regional companies which understand the local market better than we do. This expansion increases the
complexity of our business and places strain on our management, personnel, operations, systems, technical
performance, financial resources, and internal financial control and reporting functions. Any difficulties with
our international operations could harm our future sales and operating results. In addition, we may not be able
to manage international growth effectively, which could damage our reputation, limit our growth and
negatively affect our operating results.
We are subject to international, federal, state and local laws and regulations, including those related to
privacy, which 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. Regulations with which we must comply include accounting
standards, taxation requirements (including income tax rates, tariff and import duties, new tax laws and
revised tax law interpretations), regulations regarding financial matters, environmental regulations, privacy
regulations, regulations regarding advertising directed toward children, safety and other administrative and
regulatory restrictions. Our international business requires compliance with the Foreign Corrupt Practices Act,
the UK Bribery Act and similar laws. We are also subject to regulation by the United States Consumer
Product Safety Commission and other similar federal, state and international regulatory authorities, some of
which have conflicting standards and requirements. In addition, numerous states have enacted, and many
others are considering enacting, laws directed at manufacturers regarding recycling of electronic products.
Compliance with the various laws and regulations and other requirements of regulatory authorities imposes
significant costs on the conduct of our business.
Changes to privacy regulations in the U.S. or Europe could have a significant impact on our business, as a
growing percentage of our sales come from our web-connected multimedia learning platforms and related
content. As we focus on web-connected products and direct marketing to consumers through the Internet,
regulatory changes regarding the collection, use, disclosure, or security of personal information or other
privacy-related matters, could negatively affect our business. Furthermore, consumer concerns regarding such
matters, even if unfounded, could damage our reputation and operating results.
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, and could lead to
significant negative media attention and consumer dissatisfaction, either of 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.
Political developments, changes in trade relations, the threat or occurrence of armed hostilities,
terrorism, labor strikes, natural disasters or public health issues could have a material adverse effect on
our business.
Our business is international in scope. The deterioration of the political or socioeconomic situation in a
country in which we have significant sales, operations or third-party manufacturers or suppliers, or the
breakdown of trade relations between the U.S. and a foreign country in which we have or utilize significant
manufacturing facilities or have other operations, could adversely affect our business, financial condition, and
results of operations. For example, a change in trade status for China, where the vast majority of our contract
manufacturers are located, could result in a substantial increase in the import duty of toys manufactured in
China and imported into the U.S. In addition, armed hostilities, terrorism, natural disasters, or public health
issues, whether in the U.S. or abroad, could cause damage and disruption to our company, our suppliers, our
manufacturers, or our customers or could create political or economic instability, any of which could have a
material adverse impact on our business. For example, our U.S. distribution center and our corporate
headquarters are located in California near major earthquake faults that have experienced earthquakes in the
past and that are expected to recur in the future. See also ‘‘System failures in our online services or web store
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