THQ 2004 Annual Report Download - page 53

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We are exposed to certain market risks arising from transactions in the normal course of business, principally risk associated with interest rate and
foreign currency fluctuations.
INTEREST RATE RISK
We have interest rate risk primarily related to our investment portfolio. A substantial portion of our portfolio is in short-term investments made up
of floating rate corporate notes and municipal securities. The value of these investments may fluctuate with changes in interest rates. However, we believe
this risk is immaterial due to the short-term nature of the investments. The credit facility is based on variable interest rates. At March 31, 2004, we had
outstanding letters of credit of $3.1 million.
FOREIGN CURRENCY RISK
We transact business in many different foreign currencies and may be exposed to financial market risk resulting from fluctuations in foreign currency
exchange rates, particularly the GBP and the Euro, which may result in a gain or loss of earnings to us. The volatility of the GBP and the Euro (and all
other applicable currencies) is monitored frequently throughout the year. We face two risks related to foreign currency exchange: translation risk and
transaction risk.Amounts invested in our foreign operations are translated into U.S. dollars at the exchange rates in effect at the balance sheet date.The
resulting translation adjustments are recorded as a component of accumulated other comprehensive income (loss) in the stockholders' equity section of
the Consolidated Balance Sheets. Our foreign subsidiaries generally collect revenues and pay expenses in currencies other than the United States
dollar. Since the functional currencies of our foreign operations are generally denominated in the local currency of our subsidiaries, the foreign currency
translation adjustments are reflected as a component of stockholders' equity and do not impact operating results. Revenues and expenses in foreign
currencies translate into higher or lower revenues and expenses in U.S. dollars as the U.S. dollar weakens or strengthens against other currencies.
Therefore, changes in exchange rates may negatively affect our consolidated revenues and expenses (as expressed in U.S. dollars) from foreign operations.
Currency transaction gains or losses arising from transactions in currencies other than the functional currency are included within General and
Administrative expense within the Consolidated Statements of Operations.While we have not engaged in foreign currency hedging, we may in the future
use hedging programs, currency forward contracts, currency options and/or other derivative financial instruments commonly utilized to reduce financial
market risks if it is determined that such hedging activities are appropriate to reduce risk.
QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
50:51
THQ : 2004 : ANNUAL REPORT