iRobot 2005 Annual Report Download - page 56

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Foreign Currency Exchange Risk
Nearly all of our revenue is derived from transactions denominated in U.S. dollars, even though we
maintain sales and business operations in foreign countries. As such, we have exposure to adverse changes in
exchange rates associated with operating expenses of our foreign operations, but we believe this exposure to be
immaterial.
Interest Rate Sensitivity
We had unrestricted cash and cash equivalents at December 31, 2005 totaling $76.1 million. The
unrestricted cash and cash equivalents are held for working capital purposes. We do not enter into investments
for trading or speculative purposes. Some of the securities in which we invest, however, may be subject to
market risk. This means that a change in prevailing interest rates may cause the principal amount of the
investment to fluctuate. To minimize this risk in the future, we intend to maintain our portfolio of cash
equivalents and short-term investments in a variety of securities, including commercial paper, money market
funds, debt securities and certificates of deposit. Due to the short-term nature of these investments, we believe
that we do not have any material exposure to changes in the fair value of our investment portfolio as a result of
changes in interest rates. As of December 31, 2005, all of our investments were held in money market
accounts.
Our exposure to market risk also relates to the increase or decrease in the amount of interest expense we
must pay on our outstanding debt instruments, primarily certain borrowings under our bank line of credit. The
advances under this line of credit bear a variable rate of interest determined as a function of the prime rate or
the published LIBOR rate at the time of the borrowing. At December 31, 2005, there were no amounts
outstanding under our working capital line of credit.
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