Citrix 2000 Annual Report Download - page 32

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30
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The following discussion about the Company's market risk includes
"forward−looking statements" that involve risks and uncertainties. Actual
results could differ materially from those projected in the forward−looking
statements.
The Company is exposed to financial market risks, including changes in
interest rates and foreign currency exchange rates. To mitigate foreign currency
risk, the Company utilizes derivative financial instruments. The Company does
not use derivative financial instruments for speculative or trading purposes.
All of the potential changes noted below are based on sensitivity analyses
performed on the Company's financial positions at December 31, 2000. Actual
results may differ materially.
The Company maintains a non−trading investment portfolio of investment
grade, highly liquid, debt securities, which limits the amount of credit
exposure to any one issue, issuer, or type of instrument. The securities in the
Company's investment portfolio are not leveraged. The securities classified as
available−for−sale are subject to interest rate risk. The modeling technique
used measures the change in fair values arising from an immediate hypothetical
shift in market interest rates and assumes that ending fair values include
principal plus accrued interest, dividends and reinvestment income. If market
interest rates were to increase by 100 basis points from December 31, 2000 and
1999 levels, the fair value of the portfolio would decline by approximately
$10.4 million and $4.5 million, respectively.
A substantial majority of the Company's overseas expense and capital
purchasing activities are transacted in local currencies, primarily British
Pounds Sterling, Euros, Swiss Francs, and Australian Dollars. To protect against
reductions in value and the volatility of future cash flows caused by changes in
currency exchange rates, the Company has established a hedging program. The
Company uses foreign currency contracts to hedge certain firmly committed and
forecasted foreign currency expenditures. The Company's hedging program reduces,
but does not entirely eliminate, the impact of currency exchange rate movements.
A sensitivity analysis was performed on the Company's hedging portfolio as of
December 31, 2000. This analysis indicated that a hypothetical 10% appreciation
of the U.S. dollar from December 31, 2000 market rates would increase the fair
value of the Company's forward contracts by $5.4 million. Conversely, a
hypothetical 10% depreciation of the U.S. dollar from December 31, 2000 market
rates would decrease the fair value of the Company's forward contracts by $5.4
million. The Company does not anticipate any material adverse impact to its
consolidated financial position, results of operations, or cash flows as a
result of these forward foreign exchange contracts. These estimates are not
necessarily indicative of future performance, and actual results may differ
materially.
ITEM 8. FINANCIAL STATEMENTS AND SCHEDULES
The Company's Financial Statements and related financial statement
schedule, together with the report of independent certified public accountants,
appear at pages F−1 through F−29, respectively, of this Form 10−K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in or disagreements with accountants on
accounting or financial disclosure matters during the Company's two most recent
fiscal years.
30