Chegg 2013 Annual Report Download - page 110

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We will continue to use judgment in evaluating the assumptions related to our stock-based compensation
expense on a prospective basis. As we continue to accumulate additional data related to our common stock, we
may refine our estimates, which could materially impact our future stock-based compensation expense.
Recent Accounting Pronouncements
Refer to Note 2 – Significant Accounting Policies in the Notes to Consolidated Financial Statements for
relevant recent accounting pronouncements.
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risk, including changes to interest rates, foreign currency exchange rates and
inflation.
Foreign Currency Exchange Risk
International revenue as a percentage of net revenues is not significant, and our sales contracts are
denominated primarily in U.S. dollars. A portion of our operating expenses are incurred outside the United States
and are denominated in foreign currencies, which are subject to fluctuations due to changes in foreign currency
exchange rates, particularly changes in the Chinese Renminbi and Indian Rupee. To date, we have not entered
into derivatives or hedging strategies as our exposure to foreign currency exchange rates has not been material to
our historical operating results, but we may do so in the future if our exposure to foreign currency should become
more significant. There were no significant foreign exchange gains or losses in the years ended December 31,
2013, 2012 and 2011, respectively.
Interest Rate Sensitivity
We had cash and cash equivalents and investments totaling $138.3 million and $21.0 million as of
December 31, 2013 and 2012, respectively. Our cash and cash equivalents and investments consist of cash,
money market funds, corporate securities and commercial paper. Our investment policy and strategy are focused
on preservation of capital, supporting our liquidity requirements, and delivering competitive returns subject to
prevailing market conditions. Changes in U.S. interest rates affect the interest earned on our cash and cash
equivalents and investments and the market value of those securities. A hypothetical 100 basis point increase in
interest rates would result in a decrease of approximately $0.2 million in the market value of our available-for-
sale securities as of December 31, 2013. Any realized gains or losses resulting from such interest rate changes
would only occur if we sold the investments prior to maturity. In 2012, our exposure to interest rate risk
primarily related to the interest income generated by excess cash and cash equivalents held for working capital
purposes. We were not exposed to material risks due to changes in market interest rates given the liquidity of the
cash and money market accounts and investments in which we invested our cash.
Interest rate risk also reflects our exposure to movements in interest rates associated with our revolving
credit facility. The interest bearing credit facility is denominated in U.S. dollars and the interest expense is based
on the Federal Funds Rate, Prime or LIBOR interest rate plus an additional margin. As of December 31, 2013,
we did not have an outstanding balance on this credit facility.
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