Adaptec 2002 Annual Report Download - page 57

Download and view the complete annual report

Please find page 57 of the 2002 Adaptec 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.

Page out of 114

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114

Foreign currency translation. For all foreign operations, the U.S. dollar is the functional currency. Assets
and liabilities in foreign currencies are translated into U.S. dollars using the exchange rate at the
balance sheet date. Revenues and expenses are translated at average rates of exchange during the year. Gains
and losses from foreign currency transactions are included in Interest and other income, net.
Fair value of financial instruments. The estimated fair value of financial instruments has been determined
by the Company using available market information and appropriate valuation methodologies. However,
considerable judgment is required in interpreting market data to develop the estimates of fair value.
Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company
could realize in a current market exchange.
The Company's carrying value of cash equivalents, accounts receivable, accounts payable and other accrued
liabilities approximates fair value because of their short maturities.
The fair value of the Company's short−term investments, and investment in bonds and notes are determined
using estimated market prices provided for those securities (see Note 4). The fair value of investments in
public companies is determined using quoted market prices for those securities. The fair value of
investments in non−public entities and the fair value of the deposits for wafer fabrication capacity are not
readily determinable.
The fair value of the Company's obligations under capital leases and long−term debt other than the
convertible subordinated notes approximated their carrying value.
The fair value of the convertible subordinated notes at December 31, 2002 was approximately $207.6 million,
based on the average bid and ask price of these notes. The fair value of these notes at December 31, 2001
was not readily determinable as there was no established public training market for them. These notes are
not listed on any securities exchange or included in any automated quotation system. The recorded bid and
ask price may not be reliable as the figures cannot be independently verified and not all trades are
reflected.
On January 1, 2001 PMC adopted Financial Accounting Standards Board FASB Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133). SFAS 133
requires that all derivatives be recorded on the balance sheet at fair value. SFAS 133 did not have a
material impact on the date of adoption and did not result in a cumulative transition adjustment. As of and
for the year ended December 31, 2002, the use of derivative financial instruments was not material to our
results of operations or our financial position.
Concentrations. The Company maintains its cash, cash equivalents, short−term investments and long−term
investments in investment grade financial instruments with high−quality financial institutions, thereby
reducing credit risk concentrations.
At December 31, 2002, approximately 22% (2001 − 20%) of accounts receivable represented amounts due from one
of the Company's distributors. The Company believes that this concentration and the concentration of credit
risk resulting from trade receivables owing from high−technology industry customers is substantially
mitigated by the Company's credit evaluation process, relatively short collection terms and the geographical
dispersion of the Company's sales. The Company generally does not require collateral security for
outstanding amounts.
55