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application. We will adopt this standard on January 2, 2006 and currently do not anticipate that it will have a
material effect on its financial statements or disclosures.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to financial market risks, including changes in interest rates, foreign currency exchange rates
and marketable equity security prices.
Interest Rate Risk. Our exposure to market risk for changes in interest rates relates primarily to our
investment portfolio. The primary objective of our investment activities is to preserve principal while maximizing
yields without significantly increasing risk. This is accomplished by investing in widely diversified short-term
investments, consisting primarily of investment grade securities, substantially all of which either mature within the
next twelve months or have characteristics of short-term investments. As of January 1, 2006, a hypothetical 50 basis
point increase in interest rates would result in an approximate $2.6 million decline (less than 0.25%) in the fair value
of our available-for-sale debt securities.
Foreign Currency Risk. A substantial majority of our revenue, expense and capital purchasing activity is
transacted in U.S. dollars. However, we do enter into transactions in other currencies, primarily the Japanese yen.
Movements in currency exchange rates, especially the Japanese yen, could cause variability in our revenues,
expenses or other income (expense), net. We had forward exchange contracts in place with a notional amount of
3.95 billion Japanese yen, or approximately $34 million based upon the exchange rate at January 1, 2006 and zero as
of January 2, 2005. The effect of an immediate 10% adverse change in exchange rates on forward exchange
contracts would result in an approximate $3.0 million loss. However, as we utilize foreign currency instruments, for
mitigating anticipated balance sheet exposures, a loss in fair value for those instruments is generally offset by
increases in the value of the underlying exposure. See Item 1A, “Risk Factors.” and Note 5 to our consolidated
financial statements included in Item 8 of this report.
Market Risk. We also hold available-for-sale equity securities in semiconductor wafer manufacturing
companies. As of January 1, 2006, a reduction in prices of 10% of these marketable equity securities would
result in a decrease in the fair value of our investments in marketable equity securities of approximately $2.7 million.
All of the potential changes noted above are based on sensitivity analysis performed on our financial position at
January 1, 2006. Actual results may differ materially.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is set forth beginning at page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer
and principal financial officer, we conducted an evaluation of the effectiveness of the design and operation of our
disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act
of 1934 as of the end of the period covered by this report (the “Evaluation Date”). Based upon the evaluation, our
principal executive officer and principal financial officer concluded as of the Evaluation Date that our disclosure
controls and procedures were effective. Disclosure controls are controls and procedures designed to reasonably
ensure that information required to be disclosed in our reports filed under the Exchange Act, such as this report, is
recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
Disclosure controls include controls and procedures designed to reasonably ensure that such information is
accumulated and communicated to our management, including our chief executive officer and chief financial
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Annual Report