Adaptec 2008 Annual Report Download - page 48

Foreign Currency
Our sales and corresponding receivables are denominated primarily in U.S. dollars. We generate a
significant portion of our revenues from sales to customers located outside the United States including Canada,
Europe, the Middle East and Asia. We are subject to risks typical of an international business including, but not
limited to, differing economic conditions, changes in political climate, differing tax structures, other regulations
and restrictions and foreign exchange rate volatility. Accordingly, our future results could be materially adversely
affected by changes in these or other factors.
Through our operations in Canada and elsewhere outside the United States, we incur research and
development, sales, customer support and administrative expenses in Canadian and other foreign currencies. We
are exposed, in the normal course of business, to foreign currency risks on these expenditures, particularly in
Canada. In our effort to manage such risks, we have adopted a foreign currency risk management policy intended
to reduce the effects of potential short-term fluctuations on our operating results stemming from our exposure to
these risks. As part of this risk management strategy, we enter into foreign exchange forward contracts on behalf
of our Canadian subsidiary. These forward contracts offset the impact of exchange rate fluctuations on forecasted
cash flows or firm commitments. We limit the forward contracts operational period to twelve months or less and
we do not enter into foreign exchange forward contracts for trading purposes. Because we do not engage in
foreign exchange risk management techniques beyond these periods, our cost structure is subject to long-term
changes in foreign exchange rates.
As at December 28, 2008, we had twelve currency forward contracts outstanding that qualified and were
designated as cash flow hedges. The U.S. dollar notional amount of these contracts was $43.6 million and the
contracts had a fair value of ($4.6) million.
We attempt to limit our exposure to foreign exchange rate fluctuations from our Canadian dollar net asset or
liability positions. A 5% shift in the foreign exchange rates between U.S. dollar and the Canadian dollar would
impact pre-tax net income by approximately $1.2 million.
Other Investments
Our other investments include strategic investments in privately held companies that are carried on our
balance sheet at cost, net of write-downs for non-temporary declines in market value. We expect to make
additional investments like these in the future. These investments are inherently risky, as they typically are
comprised of investments in companies and partnerships that are still in the start-up or development stages. The
market for the technologies or products that they have under development is typically in the early stages, and
may never materialize. We could lose our entire investment in these companies and partnerships or may incur an
additional expense if we determine that the value of these assets has been impaired. For example, in the second
quarter of 2006 we recorded a charge of $3.2 million for impairment of an investment in a private company. We
may record additional impairment charges should we determine that our investments have incurred a
non-temporary decline in value.
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