Memorex 2014 Annual Report Download - page 15

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unfavorable tax laws, restrictions on royalties, dividend and currency remittances, changes in foreign laws and
regulations, requirements for governmental approvals for new ventures and local participation in operations such as
local equity ownership and workers' councils. In addition, our business and financial results are affected by
fluctuations in world financial markets. Changes in local and regional economic conditions, including fluctuations in
exchange rates, may affect product demand in our non-U.S. operations and export markets. Additionally, some of
our international suppliers pay us quarterly or annual rebates based on the amount of purchases we make from
them. If negative conditions in the global credit markets prevent our customers' access to credit, product orders in
these channels may decrease, which could result in lower revenue. Likewise, our suppliers may face challenges in
obtaining credit, in selling their products or otherwise in operating their businesses. Foreign currency fluctuations
can also affect reported profits of our non-U.S. operations where transactions are generally denominated in local
currencies. A recession in any of the regions we serve might affect product demand and cause fluctuations in
exchange rates. In addition, currency fluctuations may affect the prices we pay suppliers for materials used in our
products. Our financial statements are denominated in U.S. dollars. Accordingly, fluctuations in exchange rates,
including exchange rate volatility in the Euro and the Japanese Yen, may give rise to translation gains or losses
when financial statements of non-U.S. operating units are translated into U.S. dollars. Given that the majority of our
revenues are non-U.S. based, a strengthening of the U.S. dollar against other major foreign currencies could
adversely affect our results of operations. While these factors or the impact of these factors are difficult to predict,
any one or more of them could adversely affect our business, financial condition or operating results.
We use third-party contract manufacturing services and supplier-provided parts, components, and
sub-systems in our businesses and significant shortages, supplier capacity constraints, supplier
production disruptions or price increases could increase our operating costs and adversely impact the
competitive positions of our products. Our reliance on suppliers and third-party contract manufacturing to secure
raw materials, parts and components used in our products exposes us to volatility in the price and availability of
these materials. In some instances, we depend upon a single source of supply, manufacturing or assembly or
participate in commodity markets that may be subject to allocations by suppliers. A disruption in deliveries from our
suppliers or third-party contract manufacturers, supplier capacity constraints, supplier and third-party contract
manufacturer production disruptions, price increases or decreased availability of raw materials or commodities
could have an adverse effect on our ability to meet our commitments to customers or increase our operating costs.
Additionally, we may experience changes in the supply and cost of raw materials and key components of our
products resulting from the effects of natural disasters. We believe that our supply management and production
practices are based on an appropriate balancing of the foreseeable risks and the costs of alternative practices. No
assurances can be given that acceptable cost levels will continue in the future. In addition, some critical raw
materials and key components have a limited number of suppliers. If we cannot obtain those raw materials or
critical components from the suppliers, we will not be able to produce certain products.
We may engage in business combinations that are dilutive to existing shareholders, result in
unanticipated accounting charges or otherwise harm our results of operations, and result in difficulties in
assimilating and integrating the operations, personnel, technologies, products and information systems of
acquired companies or businesses. We use financial assumptions and forecasts to determine the negotiated
price we are willing to pay for an acquisition. If those financial assumptions and/or forecasts are not accurate, the
price we pay may be too high, resulting in an inefficient use of cash and future goodwill impairment.
No assurance can be given that our previous or future acquisitions will be successful and will not materially
adversely affect our business, operating results, or financial condition. Failure to manage and successfully integrate
acquired businesses could materially harm our business and operating results. Even when an acquired company
has already developed and marketed products, there can be no assurance that such products will be successful
after the closing and will not cannibalize sales of our existing products, that product enhancements will be made in
a timely fashion or that pre-acquisition due diligence will have identified all possible issues that might arise with
respect to such company. Failed business combinations, or the efforts to create a business combination, can also
result in litigation.
Acquisitions may require capital infusions, typically entail many risks and could result in difficulties in
assimilating and integrating the operations, personnel, technologies, products and information systems of acquired
companies. We may experience delays in the timing and successful integration of acquired technologies and
product development, unanticipated costs and expenditures, changing relationships with customers, suppliers and
strategic partners, or contractual, intellectual property or employment issues. In addition, key personnel of an
acquired company may decide not to work for us. The acquisition of another company or its products and
technologies may also result in our entering into a business market in which we have little or no prior experience.
These challenges could disrupt our ongoing business, distract our management and employees, harm our
reputation, subject us to an increased risk of intellectual property and other litigation and increase our expenses.