LeapFrog 2015 Annual Report Download - page 23

• transportation delays and interruptions, including cross-border delays due to customs clearance and
other point-of-entry restrictions;
• timely localization of products and content;
• currency conversion risks and currency fluctuations; and
• limitations, including taxes, on the repatriation of earnings.
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 U.S. 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 and the
disclosure of the chemical composition of consumer products, including toys. 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 digital multimedia learning platforms and related content.
As we focus on digital 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
16