iRobot 2010 Annual Report Download - page 91

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Foreign Currency Exchange Risk
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. Additionally, we accept orders for home robot products in currencies other than the U.S. dollar. We
regularly monitor the level of non-U.S. dollar accounts receivable balances to determine if any actions, including
possibly entering into foreign currency forward contracts, should be taken to minimize the impact of fluctuating
exchange rates on our results of operations. Our international revenue is primarily denominated in U.S. dollars and
therefore any fluctuations in the Euro or any other non-U.S. dollar currencies will have minimal direct impact on our
international revenue. However, as the U.S. dollar strengthens or weakens against other currencies, our international
distributors may be impacted, which could affect their profitability and our ability to maintain current pricing levels
on our international consumer products.
Interest Rate Sensitivity
At January 1, 2011, we had unrestricted cash and cash equivalents of $108.4 million and short term
investments of $13.9 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 fair
market value of the investment to fluctuate. To minimize this risk in the future, we intend to maintain our portfolio
of cash equivalents in a variety of securities, 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 January 1, 2011,
all of our cash and cash equivalents were held in interest-bearing demand deposits and 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 any outstanding debt instruments, primarily certain borrowings under our working capital line of credit. The
advances under the working capital line of credit bear a variable rate of interest determined as a function of the
prime rate or the LIBOR rate at the time of the borrowing. At January 1, 2011, we had letters of credit outstanding of
$1.9 million under our working capital line of credit.
45
Form 10-K